THE GOVERNMENT hiked the volume of Treasury bills (T-bills) it awarded on Monday, even opening the tap facility anew as bids soared while rates moved sideways.

The Bureau of the Treasury (BTr) on Monday borrowed P26 billion via T-bills on Monday, higher than its original P20-billion program.

Total bids reached P83.995 billion yesterday, the bulk of which were for one-year securities, prompting the BTr to open the tap facility to offer an additional P10 billion in 364-day papers to accommodate excess demand.

Broken down, the Treasury raised P7 billion from the 91-day T-bills, higher than the P5-billion program, out of tenders worth P17.35 billion. The average rate for the three-month papers stood at 2.046%, slightly lower than the 2.058% fetched in the auction last week.

It also raised the programmed P5 billion from 182-day papers as demand reached P15.55 billion. The average rate for the six-month T-bills inched up by 0.4 basis point (bp) to 2.118% from 2.114% previously.

The government also increased to P14 billion the volume of 364-day T-bills it accepted from its plan to raise just P10 billion as bids for the tenor hit P51.095 billion. The average yield on the one-year papers declined 8.8 bps to 2.42% from last week’s 2.508%.

National Treasurer Rosalia V. de Leon said the strong demand for short-term tenors showed investors continued their flight to safety, stretching to the longer tenor as they sought higher yields.

“Sentiment continues to be in safe assets but try to stretch yield with one-year tenor,” Ms. De Leon told reporters yesterday via Viber.

A bond trader said the strong demand, especially for the one-year papers which were over five times oversubscribed, indicated that investors are seeking safety from government bonds as they don’t see growth potential ahead.

“Really stronger demand for one- to five-year tenors now as shown by this auction. [This could] mean they don’t see growth potential in that horizon. Mainly due to [business] restructuring,” the trader said.

The trader noted some companies have been announcing restructuring plans recently, such as Jollibee Foods Corp. allotment of P7 billion to rationalize and adapt to the changing behavior of consumers, as well as BDO Unibank, Inc.’s move to expand its loan loss provisions to P22.1 billion from P2.1 billion previously in anticipation of higher nonperforming loans.

“The only reason 91- and 182- day can’t go lower is because investors would want to insure against inflation. So far, we see 91- and 182-day yield below the CPI (consumer price index) of 2.3%,” the trader added, referring to the central bank’s point projection for May headline inflation.

The Bangko Sentral ng Pilipinas’ Department of Economic Research last week said headline inflation for May likely settled between 1.9% and 2.7%, giving a point projection of 2.3%.

Meanwhile, Ms. De Leon said they will continue to monitor the local market for developments for a possible jumbo bond issue or another sale of retail Treasury bonds (RTB).

“[We remain] watchful of developments and risk return tolerance of investors,” she said when asked if the Treasury is eyeing more issuances amid the robust liquidity in the local market.

The government plans to borrow P170 billion from the local market in June: P110 billion via weekly T-bill auctions and the remaining P60 billion in Treasury bonds to be offered fortnightly. — Beatrice M. Laforga

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