THE GOVERNMENT partially awarded the Treasury bills (T-bill) it auctioned off yesterday, rejecting some bids for the shortest tenor, as investors expect domestic inflation to decelerate further this year.
It even offered an over-the-counter (OTC) sale of the T-bills as well as a tap facility to take advantage of the strong demand.
The Bureau of the Treasury (BTr) borrowed P16.72 billion out of the P20 billion it intended to raise at its T-bills auction on Monday, its first offering for the year.
Bids from market participants amounted to P29.4 billion, with the bulk of the demand going to the longer tenors.
Broken down, the Treasury borrowed just P2.72 billion out of the programmed P6 billion via the 91-day tenor yesterday. Tenders reached P4.344 billion, also below the amount the government intended to raise. The average rate for the papers went up 8.8 basis points (bp) to 5.411% from the 5.323% fetched during the previous auction.
For the 182-day T-bills, the government borrowed P6 billion as planned out of bids totalling P9.166 billion. Its average yield increased 8 bps to 6.424% from the 6.344% fetched at the auction last Dec. 10 and also bounced back from the full rejection the made for the tenor at the Dec. 17 offering.
The Treasury also made a full award of the 364-day papers, accepting the programmed P6 billion out of total offers amounting to P15.78 billion. The average yield rose 5.6 bps to 6.641% from the 6.585% quoted for the previous award. The government also rejected all bids for this tenor last Dec. 17.
According to the Treasury’s website, it opened a tap facility from 2 to 4 p.m. yesterday for the one-year papers. The facility was opened to the 10 firms who have been named as market makers.
Aside from this, the Treasury also opened the OTC sale of the 91-, 182- and 364-day IOUs to government owned and controlled corporations. The Treasury last opened its OTC window in 2013.
Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.831%, 6.529%, and 6.768% yesterday, respectively.
National Treasurer Rosalia V. De Leon said the Treasury’s first auction this year was “good so far” given that investors now prefer the longer tenors.
“Investors are now going…longer in terms of the bills…given that expectations [on] inflation will continue to trend downwards,” Ms. De Leon told reporters yesterday.
Inflation continued to ease last month, registering a 5.1% print in December. This was slower than market expectations as well as the 5.2-6% estimate range of the central bank.
For 2018, headline inflation averaged 5.2% — faster than the central bank’s 2-4% target range and the highest since 2008’s 8.2%.
Ms. De Leon added that market participants also priced in speculations that the US Federal Reserve might pause from hiking interest rates given the “very guarded” remarks of Fed Chair Jerome Powell.
“[The Fed said] they are listening to the markets and patiently watching also the global economy, so they might take a pause,” she added.
Sought for comment, a trader said the papers fetched higher rates, with the shortest tenor undersubscribed given the higher borrowing volume for this quarter compared with the previous period.
“The rates were still elevated due to the increase in volume despite the market indication that the rates will go lower for this auction,” the trader said in a phone interview. — Karl Angelo N. Vidal

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