THE TREASURY made a partial award of the reissued 20-year bonds it offered on Tuesday.

THE GOVERNMENT made a partial award of the reissued Treasury bonds (T-bond) it auctioned off yesterday as rates increased, with investors opting for shorter tenors.

The Bureau of the Treasury awarded just P12.271 billion of the P20 billion programmed for the reissued 20-year papers even as the tenor attracted P28 billion worth of bids.

This, as the bonds fetched an average rate of 5.341%, climbing 32.6 basis points (bps) from the 5.015% quoted when the tenor was last awarded in July. At the Sept. 24 auction, the Treasury rejected bids worth P30.7 billion for this tenor as the market asked for higher rates.

At the secondary market on Tuesday, the 20-year papers were quoted at 5.247%, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Following the auction, Deputy Treasurer Sharon P. Almanza told reporters that its offer was met with healthy demand from investors, but not much compared to the previous offering.

Ms. Almanza said there is not much appetite for longer tenors as the market prefers shorter-dated securities following the central bank chief’s remarks on the possibility of another rate cut within this year.

“They opt to stay on the short given ’yung (the) uncertainty sa (on) rates. ’Di ba the BSP (Bangko Sentral ng Pilipinas) Governor said there might be another possible cut in December but it will be data-driven, so depending on what the data will show in December. So there’s still a possible cut,” she said.

Despite higher returns sought by the market, Ms. Almanza said the auction committee still decided to make a partial award to accommodate investors in the long tenor and in an attempt to reprice the bonds so its rate will be “not that high.”

A bond trader interviewed yesterday shared the same view, saying investors are choosing to put their money in shorter tenors with the upcoming liquidity from maturities.

“For the auction today, it’s at the higher end of market expectation. Medyo weak ’yung appetite ng market for the long end kasi (The market’s appetite for bonds at the long end of the curve is weak because) there will be liquidity coming from the maturity [of some government securities], which will be invested in the short end. They mostly invested in the short tenor,” the trader said on Tuesday.

BSP Governor Benjamin E. Diokno told reporters on Monday that the Monetary Board’s policy meetings will always be data-dependent.

Asked if another 25-bp cut will be possible towards the end of 2019 as projected by a report of S&P Global Ratings, Mr. Diokno said it is not off the table.

However, he clarified that they will avoid any drastic adjustments in policy rates as they do not want to be misinterpreted by the market as “desperate.”

Currently, benchmark interest rates stand at 3.5% for the overnight deposit facility, four percent for overnight reverse repurchase and 4.5% for overnight lending.

The trader added that investors may be expecting higher rates next year — hence they opted for shorter tenors.

Meanwhile, Ms. Almanza said uncertainties overseas, such as the ongoing trade negotiations by US and China in bid to end the prolonged trade dispute, might have affected investor sentiment on the auction.

The government is set to borrow P220 billion from the local market this quarter, broken down into P100 billion in Treasury bills and P120 billion via T-bonds.

It is looking to raise 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 gross domestic product. — Beatrice M. Laforga