THE GOVERNMENT made a partial award of the Treasury bills (T-bill) it placed on the auction block on Monday, with demand for the shortest tenor strengthening following the latest inflation print, which gave the local central bank some space to adjust benchmark rates.

The Bureau of the Treasury (BTr) borrowed just P11.075 billion out of the programmed P15 billion at its auction yesterday even as the offer was oversubscribed, with bids from investors amounting to P20.856 billion.

Broken down, the Treasury borrowed P4 billion as planned via the 91-day tenor yesterday as tenders reached P9.601 billion. The average rate declined 2.3 basis points (bp) to 5.612% from the 5.635% tallied in the previous auction.

Meanwhile, the government made a partial award of the 182-day T-bills, accepting just P2.76 billion out of the P5-billion program, even with total offers amounting to P5.34 billion. The tenor’s average yield climbed 2.4 bps to 5.982% from the 5.958% quoted in the previous offer.

For the 364-day T-bills, the government borrowed P4.315 billion out of the P6 billion it wanted to raise. The offer volume was undersubscribed as bids totalled just P5.915 billion. The average yield on the papers picked up 9.1 bps to 6.052% from the 5.961% fetched last week.

At the secondary market yesterday, rates of the three-month, six-month and one-year papers closed at 5.737%, 5.959%, and 6.035%, respectively.

Deputy Treasurer Erwin D. Sta. Ana said the market sought to park most of their funds in the 91-day tenor, with tepid demand for the 182-day and 364-day papers causing their rates to increase.

“The decision of the committee was to cut the auction for the latter two tenors at the rate wherein the market came in more,” Mr. Sta. Ana told reporters yesterday.

“If we see that the bulk of the submission is on this rate, we assume that the market is at that level.”

He added that the market demand was concentrated in the shortest tenor as participants priced in possible adjustments in monetary policy in the next quarters.

Market watchers are taking the latest inflation print, which came slower than expected, as a green light for key interest rate cuts.

March inflation eased further to 3.3%, a sharper slowdown than what market players expected. This is the slowest pace since January 2018, and marks the fifth straight month of decline since November.

However, officials of the Bangko Sentral ng Pilipinas (BSP) on Friday cautioned against swift plans to cut policy rates, saying they need to be watchful about the El Niño episode as well as rising global oil prices.

“It looks like it could be the participants are weighing in some of the possible policy movements in the next quarters, of course given several pronouncements already of the BSP,” Mr. Sta. Ana said.

He added that demand for the longer tenors was somehow muted party due to the holidays this month.

“There’s muted trading in the past days because of the short working week this week and next,” he said.

Markets are on break today in commemoration of Araw ng Kagitingan. Trading will also be suspended next week for Holy Week.

Sought for comments, a trader said yesterday’s auction results were within market expectations even as rates ended mixed.

“The movement was still sideways because of the holidays. The appetite was quite weak and as the market is waiting for the 10-year bonds on Wednesday,” the trader said in a phone interview.

The government plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion in Treasury bonds.

It is looking to borrow P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product. — Karl Angelo N. Vidal

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