Gov’t makes partial award of 182-day T-bills as rates climb

THE GOVERNMENT made a partial award of the Treasury bills (T-bill) it auctioned off on Monday as rates on the six-month securities increased.

The Bureau of the Treasury (BTr) only raised P17.99 billion via the T-bills out of the P20-billion program, fully awarding the 91- and 364-day papers while rejecting some bids for the 182-day securities.

This, even as the auction attracted P56.1 billion in bids or more than twice than the offering.

The BTr awarded P8 billion as planned via the three-month papers out of P18.45 billion in tenders at an average rate of 3.168%, which was lower compared to the secondary market yield on the tenor.

For the one-year securities, the government raised P6 billion as planned out of total bids worth P24.93 billion. The tenor fetched an average rate of 3.501%, down by 1.2 basis points (bp) from the previous auction’s 3.513%.

Meanwhile, the Treasury only borrowed P3.99 billion via the 182-day T-bills versus the P6-billion plan, even as the tenor attracted P12.74 billion worth of bids. The paper’s average rate came in at 3.249%, 5.1 bps lower than the 3.198% fetched during the auction last Nov. 4.

At the secondary market on Monday, yields on the three-month, six-month, and one-year T-bills stood at 3.168%, 3.324%, and 3.583%, respectively, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates.

Following the auction, Deputy Treasurer Sharon P. Almanza said T-bill rates fell within market expectations, with the financial system flush with liquidity given huge maturities of government securities this week.

Ms. Almanza said the rates in the low end of the curve are “converging” with the one-year tenor as the Bangko Sentral ng Pilipinas’ (BSP) decision to keep policy rates steady at the Monetary Board’s meeting last week prompted investors to “wait on the sidelines.”

“We’ve been partially awarding…so I think it’s actually converging within the one-year, considering that there’s pronouncement already by the BSP that they will be maintaining the rates. So the market is waiting on the sidelines, so it’s still within [expectations]… It’s just that we don’t want to really make the adjustment, so we try to cap it well within the BVAL,” she told reporters.

A bond trader interviewed yesterday share the same sentiment, adding there might be a “resurgence of investors coming back to the Philippines” after the BSP’s decision and better-than-expected gross domestic product (GDP) growth data released earlier this month.

“You’re also looking at the peso appreciating again against the dollar after some mild correction last week,” the trader said by phone.

The BSP’s Monetary Board, at its policy meeting last week, kept its benchmark interest rates for the overnight reverse repurchase, overnight deposit and lending facilities at four percent, 3.5% and 4.5%, respectively.

The move was widely expected after BSP Governor Benjamin E. Diokno hinted in separate television interviews that the central bank is “likely done” with rate cuts for the year.

The BSP has cut rates by a total of 75 bps this year, partially dialling back the 175-bp hike it fired off last year in the face of multi-year high inflation.

Meanwhile, the economy expanded at a faster-than-expected rate in the third quarter at 6.2%, picking up from the muted growth in the first and second quarters at 5.6% and 5.5%, respectively.

However, it would take a 6.7% GDP growth print to reach the low end of the government’s 6-7% growth target for 2019, which Socioeconomic Planning Secretary Ernesto M. Pernia said is attainable.

Meanwhile, Ms. Almanza said the committee decided to reject some bids for the six-month papers as rates were higher than the secondary market.

The bond trader explained there was no fundamental reason that drove rates on these securities higher, but it might have been a “matter of preference of what they want or targeted liquidity.”

“I think over the next auctions, lahat na ‘yan (all of the tenors) will be lower but it’s not gonna be a massive yield rally, but overall positive,” the trader added.

PRIZE BONDS READY
Meanwhile, Ms. Almanza said the Treasury’s prize bond offer is “good to go” as it has secured the necessary approvals, but the official mechanics will be announced during the launch, which is “very soon.”

She said firms participating in the offer, where the P500 stubs for the raffle can be availed, are Land Bank of the Philippines, Development Bank of the Philippines, Philippine National Bank, First Metro Investment Corp., China Banking Corp. and BDO Unibank, Inc.

She also confirmed that the raffle will have both cash and non-cash prizes, with one winner receiving P1 million during quarterly draws. — BML