THE GOVERNMENT raised P20 billion in fresh funds from Treasury bills (T-bill) yesterday, with rates sliding across all tenors as investors priced in recent pronouncements from the local and US central banks.
The Bureau of the Treasury (BTr) made a full award at its T-bills auction on Monday as tenders from investors reached P31.771 billion, well above the amount it wanted to raise. However, it was slightly lower than the P31.802 billion in tenders received a week ago.
Broken down, the Treasury accepted P6 billion as planned for the 90-day papers out of the P6.745 billion in offers from banks and other financial institutions. The average rate declined by 1.7 basis points (bp) to 5.716% from the 5.733% quoted in the previous offer. Last week, the BTr opted to reject all bids for the three-month tenor.
The government also made a full award of the 182-day debt notes it placed on the auction block, borrowing P6 billion as planned versus tenders amounting to P11.945 billion. The average yield slipped 3.9 bps to 5.936% from last week’s 5.975%.
The BTr likewise fully awarded the 364-day T-bills, accepting P8 billion out of bids totalling P13.081 billion. Its average yield also slid by 3.4 bps to 6.018% from the 6.052% tallied in the previous successful auction, as the government also rejected all bids for the one-year papers last week.
At the secondary market on Monday, the three-month, six-month and one-year papers were quoted at 5.488%, 5.878% and 6.044%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.
Following the auction, National Treasurer Rosalia V. De Leon said rates went down as market participants priced in “what they heard from the Governor saying that there’s now room for monetary easing,” referring to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.
On Friday, Mr. Diokno said the central bank can now consider cuts in policy rates.
“Given the decelerating inflation in the Philippines, there’s an opportunity for monetary easing but as I’ve said, that would be dependent on the data that will be given to us by our technical staff,” Mr. Diokno said last week.
Benchmark interest rates currently range from 4.25-5.25%, reflecting the cumulative 175 bps increase in policy settings last year meant to arrest rising inflation expectations.
Inflation came in at 3.8% in February, easing for the fourth straight month due to milder price increases in food and non-alcoholic beverages, and landing within the 2-4% target band of the government until 2022.
“At the same time, [US Federal Reserve Chair Jerome] Powell also had interviews and he was also saying again the usual that he will be patient…and they would also be looking for data,” Ms. De Leon added.
Mr. Powell, in a televised interview, reiterated the Fed’s position that it will be patient in adjusting monetary policy, adding that the decision will be based on data and not on political considerations.
Sought for comments, a trader said the rates of the T-bills are “still high” compared to rates at the secondary market, even as yields slid across the board during the auction.
“The rates were slightly lower from previously awarded, but based on the secondary, it’s still high,” the trader said in a phone interview.
The government is set to borrow P360 billion from the domestic market this quarter. Some P240 billion will be borrowed through 12 weekly T-bill auctions, while P120 billion worth of Treasury bonds will also be issued through six fortnightly auctions.
Ms. De Leon said the government will continue to look for funding options at home to meet the 75-25 borrowing mix in favor of local sources for this year, as it is looking at returning to the Chinese and Japanese bond markets this year.
“We will continue to look for financing options. If there’s good liquidity, we can do another [RTB offering] like similar to what we did in 2017,” she said.
The government held two retail Treasury bond (RTB) offerings in 2017, selling P70 billion worth of three-year bonds to institutional and individual investors in March and P255.4 billion worth of five-year papers in November that year.
Economic managers earlier adjusted the borrowing ratio to 75-25 in favor of domestic sources for this year until 2022 from the 65-35 ratio in 2018.
For this year, the state plans to borrow P1.189 trillion to help finance its spending plan, higher than the P783.23-billion borrowing last year. Of this year’s total, P891.7 billion will be sourced locally and P297.2 billion from external creditors.
Ms. De Leon said the government is looking at offering renminbi-denominated “panda” bonds in April, as well as yen-denominated “samurai” bonds “if ever” in August. She said last month that the government is eyeing to raise $300-500 million in panda bonds and another $1-1.5 billion in samurai bonds.
The country’s economic team will head to China for a Philippine Economic Briefing in Beijing on March 20, followed by non-deal road shows in Nanjing, Fuzhou, Suzhou and Xiamen. — Karl Angelo N. Vidal