By Melissa Luz T. Lopez, Senior Reporter
THE GOVERNMENT made a partial award for Treasury bills (T-bills) on offer yesterday, rejecting bids for three-month papers as demand shifts towards longer tenors.
The Bureau of the Treasury (BTr) raised P17.455 billion out of the P20 billion programmed for Monday’s T-bills auction as yields saw mixed movements.
The state accepted P3.455 billion out of the P6.605 billion tenders for the 91-day papers, just half the P6 billion which the Treasury wanted to raise this week.
The rejection came as the state had to cap accepted yields at 5.85% after some banks wanted returns as high as 6.1%. As a result, the three-month notes fetched an average rate of 5.787%, barely changed from the 5.786% yield fetched during the March 18 offering.
On the other hand, the bureau was able to maximize their planned fund raising via the 182-day and 364-day papers.
The 182-day IOUs received P11.76 billion worth of bids, which allowed the BTr to raise its P6-billion target this week. It also fetched a lower rate of 5.927%, six basis points (bp) lower than last week’s 5.987% return.
The government also shored up P8 billion from the one-year debt notes, with demand reaching P12.818 billion. The average yield also slid to 6.044% from 6.051% previously.
Deputy Treasurer Erwin D. Sta. Ana said the latest T-bill auction results reflect the shifting market appetite towards longer tenors.
“The demand really is coming now from the long end,” Mr. Sta. Ana told reporters. “[I]t looks like it’s going to follow the inflation trajectory. So the interest rates may behave that way, assuming there are no other shocks that are involved. We may see that following the inflation path.”
Inflation has been on a downward path since hitting a nine-year peak of 6.7% in September and October last year. February’s 3.8% reading also marked the first time in a year when inflation returned to the 2-4% target range set by the Bangko Sentral ng Pilipinas (BSP).
BSP Deputy Governor Diwa C. Guinigundo said last week that the Philippines may be “out of the woods” already in terms of inflation, with the downtrend seen sustained until later this year. However, the central bank chose to stay prudent and kept benchmark interest rates unchanged last Thursday.
The BSP scaled down their inflation forecast to three percent this year from 3.1% previously, which would mean a sharp drop from 2018’s 5.2% average.
Sought for comment, a bond trader said demand for bonds are currently skewed towards tenors longer than five years, amid fears of a global recession which has started to bite financial markets.
“The yield curve of US Treasuries have inverted — that’s a sign of recession. But actually, a recession is good for bonds because they are considered safe haven (investments),” the trader said by phone.
He added that for T-bills, yields will “slowly but surely decline” to track the trend for consumer prices.
Mr. Sta. Ana added that they are due to release the borrowing program for the second quarter “within the week.” He declined to give specific details, but noted that they will “follow the demand” for longer-termed papers.
Delays in enacting the P3.757-trillion national budget — which has been the subject of a Congressional row for three months now — will not affect the BTr’s fund-raising plans just yet.
“We look at the financing requirement in general for the entire whole year. So we assume that requirement will be met so regardless of the timing of the approval of the budget, we would need to operate as if it’s the 2019 funding requirement that we are funding,” Mr. Sta. Ana added.
“Of course, the biggest factor is market conditions so if we see it’s conducive to borrow, we will seize the opportunity.”
The Treasury is looking to borrow P360 billion during the first three months of this year through a mix of short and long-term papers. The state also raised P235.935 billion from the sale of five-year retail Treasury bonds earlier this month, which are meant to support the state’s spending plans for 2019.

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