By Karl Angelo N. Vidal, Reporter
THE GOVERNMENT raised P20 billion in fresh funds from Treasury bills (T-bill) yesterday, with rates sliding across all tenors, as investors expect inflation to decelerate in January.
The Bureau of the Treasury (BTr) made a full award at its T-bills auction on Monday as offers received reached P33.657 billion, well above the amount it wanted to raise, although lower than the P37.253 billion in tenders received a week ago.
Broken down, the Treasury accepted P6 billion as planned for the 91-day papers out of the P7.481 billion offered by banks and other financial institutions. The average rate declined by five basis points (bp) to 5.484% from the 5.534% quoted in the previous offer.
The government also made a full award of the 182-day debt notes it placed on the auction block yesterday, borrowing P6 billion as planned versus total offers amounting to P8.613 billion. The average yield slipped 2.5 bps to 5.867% from last week’s 5.892%.
The Treasury likewise fully awarded the 364-day T-bills, accepting the programmed P8 billion out of bids totalling P10.897 billion. Its average yield also slid by 2.2 bps to 5.924% from the 5.946% tallied in the previous auction.
To maximize the strong demand seen during Monday’s auction, the Treasury opened the over-the-counter sale of the 90-, 182- and 364-day instruments. This was made available to tax-exempt government-owned and -controlled corporations from 2 to 4 p.m. yesterday.
Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.448%, 5.887%, and 5.954% yesterday.
Following the auction, National Treasurer Rosalia V. De Leon said the Treasury saw a “healthy” auction given that it made a full award during the offer.
“We had the full award [since] all the rates are declining. That’s in anticipation of the…inflation [report, which] will continue to decline,” she told reporters yesterday, citing the market consensus of a 4.5% headline print for January.
Inflation likely slowed further last month as food prices sustained a decline, analysts said in a BusinessWorld poll, which yielded a median estimate of 4.5%.
If realized, the projection will fall closer to the low end of the 4.3-5.1% range given by the central bank and will be slower than the 5.1% headline print tallied in December.
“We also saw that there’s a good demand given the bid-to-cover was about more than 1.5 times than our offering,” Ms. De Leon added.
Sought for comments, a trader said the BTr fully awarded the T-bills on offer as expected.
“The auction turned out good as expected, given the better [consumer price index] outlook,” a trader said in a text message.
The government plans to raise P360 billion this quarter through domestic means. Some P240 billion will be borrowed through 12 weekly T-bill auctions during the three-month period, while P120 billion worth of Treasury bonds will also be issued through six fortnightly auctions.
PANDA, SAMURAI BONDS
Meanwhile, the government is looking at raising $300-500 million through renminbi-denominated or “panda” bonds in the second quarter of the year as part of its financing program, Ms. De Leon said.
It is also looking at offering yen-denominated or “samurai” bonds amounting to $1-1.5 billion in the second half of the year.
Ms. De Leon said the government is still observing market conditions to properly time its offerings.
“Right now, we are already finished with all our approvals. We are just watching the market,” she told reporters yesterday, adding that the government will likely offer a tenor bucket of three, five, or seven years.
“If the demand is strong, we might consider a multi-tranche [bond offer] also,” the official said.
In March last year, the government raised 1.46 billion renminbi (RMB), or about $230 million, from its maiden panda bond offer, as it received overwhelming demand worth 9.22 billion RMB. The three-year yuan-denominated debt papers fetched a coupon rate of 5%.
Ms. De Leon added that the yuan-denominated bonds may be issued “just about the same time” compared to last year, depending on market conditions.
For the second issuance of panda bonds, the BTr said it will conduct non-deal road shows as well as Philippine Economic Briefings (PEB) sometime in March.
For the yen-denominated instruments, the government will conduct a PEB on Feb. 22 in Osaka, Japan, with five Japanese banks tasked to support the briefing.
“We are looking at about $1-1.5 billion, equivalent to yen,” Ms. De Leon said, adding that the government will “most likely” offer the bonds in multiple tranches.
“It might be the same tenors [as last year] — three, five and ten.”
In August last year, the state returned to the Japanese market through the issuance of multi-tranche samurai bonds worth 154.2 billion yen or about $1.39 billion.
The Treasury noted that the government still has to get approvals for the issuance of samurai bonds, which can be done after the first half.
“Because last time was in August, so the cycle is maybe after about another 12 months,” she said.
Finance Secretary Carlos G. Dominguez previously said the government is mulling floating renminbi- and yen-denominated instruments again to maintain presence in the Chinese and Japanese markets.
Last month, the government sold $1.5 billion in 10-year offshore dollar bonds — priced 110 bps above benchmark US treasuries — reflecting investor confidence in the country.
The state wants to borrow P1.189 trillion in 2019 to fund its spending plans. Of the amount, 75% will be sourced domestically while the remainder will be from foreign creditors.

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