Gov’t makes full award of T-bills as rates decline

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THE GOVERNMENT fully awarded the Treasury bills (T-bills) it auctioned off on Monday as rates mostly dropped on strong liquidity and the market’s growing appetite for papers in the short end of the curve.

The Bureau of the Treasury (BTr) raised P20 billion in T-bills yesterday as the offer was more than twice oversubscribed, with total tenders reaching P49.3 billion.

Broken down, the Treasury borrowed P6 billion as programmed via the 91-day papers from total bids worth P20.947 billion. The three-month T-bills fetched an average rate of 3.187%, 11 basis points (bps) lower than the 3.297% quoted in the auction last week.

The government raised another P6 billion as planned from the 182-day T-bills, with the tenor attracting tenders worth P15.799 billion, at an average rate of 3.523%, down by 7.4 bps from 3.597% previously.

Likewise, for the 364-day papers, the Treasury accepted P8 billion as planned out of total tenders of P12.522 billion. The one-year securities were quoted at an average rate of 3.964%, up by just 0.1 bp from the 3.963% quoted last week.

At the secondary market on Monday, the rates for 91-, 182- and 364-day T-bills ended at 3.28%, 3.47% and 3.902%, based on the PHP Bloomberg Valuation Service Reference Rates.

National Treasurer Rosalia V. de Leon said yesterday’s auction was met with strong demand amid ample liquidity in the local market and as investors continue to prefer short tenors.

“We have a very good auction for today given the preference now of investors moving to the short end of the tenor. Also, rates dipped despite a higher inflation median coming from analysts’ expectations — 2.7% (against) 2.5% last December — so we are very satisfied with the results of the auction today,” Ms. De Leon told reporters after the auction on Monday.

Sought for comment, Robinsons Bank Corp. sovereign debt trader Kevin S. Palma shared the same sentiment, adding that market expectations of a policy rate cut by the Bangko Sentral ng Pilipinas (BSP) Monetary Board this week contributed to the strong turnout and lower yields.

“The market continues to put liquidity to work and show good appetite for short-term bonds as reflected in the very strong turnover of the offering… Icing on the cake was the reinvestment demand from a P14-billion T-bill maturity on February 5,” Mr. Palma said in a Viber message.

The Philippine Statistics Authority will report official inflation data for January on Wednesday, Feb. 5, while the BSP’s policy-setting Monetary Board will have its first rate-setting for the year on Thursday, Feb. 6.

BusinessWorld’s poll of 13 economists yielded a median estimate of 2.7% for January headline inflation, with analysts citing upside risks from the Taal Volcano eruption and a rise in some food prices still due to the African Swine Fever.

Meanwhile, 10 out of the 13 economists who joined the inflation poll were of the view that the BSP Monetary Board will ease rates by another 25 bps this week.

BSP Governor Benjamin E. Diokno last week said the central bank is still looking to bring down rates by around 50 bps in 2020. He said a 25-bp cut could also be considered as early as this quarter.

The BSP last year cut rates by a total of 75 bps, partially unwinding the 175 bps worth of hikes implemented in 2018 to quell multi-year high inflation.

Meanwhile, for the three-year retail Treasury bonds (RTBs) still on offer, Ms. De Leon said the demand has been “overwhelming,” with the volume raised breaching the P200 billion level so far, both from new money and tenders for the switch offer.

During the rate-setting auction of the 23rd RTB offering last week, the Treasury awarded a total of P134 billion in fresh funds, upsized from its initial offer of P30 billion, out of total tenders worth P149.827 billion.

The three-year papers, which have a coupon of 4.375%, will be offered until Thursday, Feb. 6.

“So far, (the) RTB offering has been met with overwhelming, good reception from investors… We have already breached the P200-billion volume, combined, switch and new money,” Ms. De Leon said.

The official said majority or three fourths of the initial volume raised was from new money, while the remaining are from tenders for the switch or the exchange offer program.

Under the exchange program, bondholders of the RTB 3-08 issued in 2017 which will mature this April can exchange these papers for the latest RTB issue.

“If we’re going to cap, then we should have already capped (the volume). We just want to give opportunity to the individual investors. We recognize that we just completed the roadshows, so there should be some time for investors to make their own decisions whether they want to move to the new RTB or tender new money for the RTB,” she said.

Ms. De Leon said usually, individual investors account for 20-30% of the total investor pool for the Treasury’s retail government securities.

With the online platform, she said they are expecting more small investors to avail of such securities, like the RTBs and the Premyo bonds.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga