THE GOVERNMENT made a partial award of the Treasury bills it placed on the auction block yesterday, rejecting all bids for the longest tenor, as market participants stayed on the sidelines ahead of the Lenten break.

The Bureau of the Treasury (BTr) borrowed just P7.264 billion out of the P15 billion it intended to raise at its auction on Monday. This, even as the offer was oversubscribed, with total demand reaching P24.784 billion.

Broken down, the Treasury borrowed P4 billion as planned out of P9.587 billion in tenders for the 91-day papers. The tenor’s average yield climbed marginally, inching up 0.2 basis point (bp) to 5.614% from the 5.212% fetched last week.

For the 182-day T-bills, the BTr borrowed P2.76 billion out of the programmed P5 billion even with total bids amounting to P7.819 billion. It fetched an average yield of 5.987%, up 0.5 bp from 5.982% during the previous auction.

The government meanwhile rejected all bids for the 364-day tenor even with tenders reaching P7.378 billion, more than the P6 billion it intended to raise. Had the government proceeded with a full award, the debt papers would have fetched an average rate of 6.131%, 7.9 bps higher than last week’s 6.052%.

Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.727%, 5.971% and 6.093%, respectively, yesterday.

Following the auction, Deputy Treasurer Erwin D. Sta. Ana said the government rejected all bids placed for the one-year T-bills as market participants sought rates higher than what it was willing to pay..

“We made the full rejection on the 364-day (papers) because the committee actually deems it quite high at this level given the shortened work week,” Mr. Sta. Ana told reporters Monday.

“Of course the banks need liquidity over the long holidays.”

Financial markets in the Philippines are closed on Thursday and Friday for the Holy Week break.

“We feel that we’ll just await the 364-day auction next week where we will be able to make sure that this is not because of the long holiday,” Mr. Sta. Ana explained.

He added that the demand was focused on the shortest T-bill tenor as investors stayed cautious amid a lack of fresh leads for this week. “I think it’s safer for them to park it at the shortest tenor.”

Sought for comment, a trader said the auction results were within expectations as investor demand was tepid ahead of the break.

“Despite a good turnout, the BTr chose to partially award today’s T-bill auction as bulk of market interest was seen in the 91-day and 182-day papers,” Kevin S. Palma, Robinsons Bank Corp. peso sovereign debt trader, said in a text message on Monday.

“Demand may have waned for the longest paper on the lack of new catalysts and ahead of the Holy Week break.”

Government borrowing from the domestic market is programmed at P315 billion for this quarter, broken down into P195 billion in T-bills and P120 billion in Treasury bonds.

PANDA BONDS
Meanwhile, Mr. Sta. Ana said the government can issue yuan-denominated or “panda” bonds in tranches, as it has a 6-billion renminbi shelf program with the National Association of Financial Market Institutional Investors (NAFMII) in China.

“That’s a possibility because it’s a shelf. So we can actually do takedowns in two years’ time,” Mr. Sta. Ana said.

National Treasurer Rosalia V. De Leon previously said the government is seeking to sell panda bonds within the second quarter amounting to $300-500 million with a tenor of either three, five or seven years.

This is lower than the $230 million or 1.46 billion renminbi in panda bonds offered by the government last year, marking its first foray into the Chinese capital market. The three-year papers offered in May fetched an average rate of five percent.

“You can actually do a number of drawdowns or takedowns from the shelf. So in this case, we are working on a transaction potentially as early as next week or maybe it can move depending on the approvals that we will be obtaining especially from NAFMII and PBoC (People’s Bank of China),” the deputy treasurer said.

The government plans to borrow P1.189 trillion this year — 75% of which will be sourced domestically while the remainder will be from foreign creditors — 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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