Gov’t makes partial award of T-bills as rates rise

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THE Bureau of the Treasury headquarters in Manila — PHOTO BY KARL ANGELO N. VIDAL

THE GOVERNMENT partially awarded the Treasury bills (T-bill) it auctioned off yesterday, with demand skewed towards the longer tenor due to elevated inflation bets for the month of September.

The Bureau of the Treasury borrowed just P9.2 billion during its T-bills auction on Monday out of the P15-billion program.

This, even as the offer remained oversubscribed with total tenders reaching P17.1 billion, albeit lower than the P20.7 billion offered by banks and other financial institutions on Sept. 17. Last week, the Treasury opted to reject all bids at its T-bills auction.

Broken down, the government did not award any 91-day T-bills. Total offers reached P3.09 billion, falling short of the P4 billion it wanted to raise.

Had the government accepted all tenders, the papers would have fetched an average rate of 4.679%.

Meanwhile, the BTr borrowed just P3.2 billion out of the P5 billion it wanted to raise via the 182-day debt. The papers fetched an average rate of 5.206%, while total offers stood at P4.14 billion.

On the other hand, the Treasury fully awarded the 364-day T-bills, accepting offers amounting to P6 billion as planned. The average yield rose to 5.648%.

At the secondary market ahead of the auction yesterday, the three- and six-month papers were quoted at 4.5517% and 4.9643%, respectively, while the rate of the one-year T-bills stood at 5.6883%.

At the close of the trading, all tenors finished with higher rates. The 91-day T-bills saw its yield climb to 4.5583%, while the 182-day papers fetched 5.0357%. The 364-day papers were quoted at 5.7182%.

National Treasurer Rosalia V. De Leon said the Treasury opted to reject some bids as rates exceeded its benchmark levels.

“Obviously, the bids would continue to be on the high side,” Ms. De Leon told reporters yesterday. “We’d rather not accept this time given all those [rates which were] not within our own reasonable benchmarks.”

She added that market players priced in expectations of a higher September inflation print. Official data is scheduled to be released on Friday.

A BusinessWorld poll of 13 economists showed inflation likely quickened further in September, yielding a median rate of 6.8%, as typhoon Mangkhut (locally known as Ompong) pushed food prices even higher.

The forecast matched the 6.8% estimate of the Bangko Sentral ng Pilipinas (BSP), but is faster than the 6.4% expected by the Department of Finance (DoF).

“There’s already the announcement by DoF and BSP their prognosis for the September inflation print. And even other analysts, the prognosis is for elevated inflation ratings for September,” Ms. De Leon said.

A bond trader concurred, saying elevated inflation expectations would push the rates for the three-month T-bills higher.

“Actually the 91-day T-bills will still move higher due to the inflation expectations and rates from the BSP to come,” the trader said. “It still up to BTr because they claim they have room to reject since they have a healthy cash position.”

Ms. De Leon yesterday reiterated that the government has the liberty to reject bids given its robust cash position on the back of the collections of the internal revenue and customs bureaus.

“We’ve also done some of our earlier [foreign] funding from both [yuan- and yen-denominated] panda and samurai [bonds],” she said.

The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion Treasury bonds.

The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product.

Meanwhile, the Treasury said it is working with banks and approvals for the planned dollar-denominated global bonds seen to be offered this quarter.

“We are working with the banks already and looking for opportunities if ever for the offshore markets,” Ms. De Leon explained, adding that the issuance will be “something that [will depend] on market conditions.”

She said Bank of China, Standard Chartered Bank and J.P. Morgan will serve as the lead arrangers for the bond sale. The banks will also serve as deal managers and bookrunners alongside Citi, UBS, Goldman Sachs and Credit Suisse.

“We’re still looking at tenors on the long end,” she added.

In January, the country returned to the global bond market after four years, offering 10-year dollar-denominated global bonds worth $2 billion which carried a coupon of 3%.

The government is also looking at issuing panda and samurai bonds within 12-18 months to maintain its presence in the said markets. — Karl Angelo N. Vidal