THE GOVERNMENT made a partial award of the Treasury bills as rates rose. — KARL ANGELO N. VIDAL

THE GOVERNMENT made a partial award of the Treasury bills (T-bill) on offer yesterday amid lukewarm demand as market players sought higher returns ahead of the policy meetings of the local and US central banks.
The Bureau of the Treasury (BTr) raised just P13.4 billion out of the programmed P20 billion at its auction on Monday.
The BTr opted to partially award the instruments as bids received totalled P24.9 billion, lower than the P31.8 billion in offers fetched during the previous T-bills auction.
Broken down, the Treasury borrowed only P3.386 billion out of the programmed P6 billion via the 91-day tenor yesterday even as tenders reached P6.686 billion.
This, as the average rate for the papers went up seven basis points (bp) to 5.786% from the 5.716% fetched during the previous auction.
For the 182-day bills, the Treasury borrowed P4.96 billion out of the P6 billion the Treasury wanted to raise, with bids totalling P9.48 billion. Its average yield also picked up 5.1 bps to 5.987% from the 5.936% fetched last week.
The government likewise made a partial award of the 364-day papers, accepting just P5.096 billion out of the P8-billion program and total offers amounting to P8.766 billion. The average yield likewise climbed 3.3 bps to 6.052% from the 6.018% quoted in the previous offer.
At the secondary market, the three-month, six-month, and one-year papers were quoted at 5.687%, 5.911% and 6.046% yesterday, based on the PHP Bloomberg Valuation Service Reference Rates.
Following the auction, National Treasurer Rosalia V. De Leon said the BTr made a partial award of the T-bills as they do not see the need for any significant increase in rates.
“But we see that the banks are charging higher rates particularly on the short end of the curve given the funding cost right now is higher because of…the tight liquidity,” Ms. De Leon told reporters yesterday.
“But…the yield curve is relatively flat because of expectations that inflation will be trekking back to the 2-4% [target] of the BSP (Bangko Sentral ng Pilipinas). So the appetite is on the long end of the curve.”
Traders interviewed last Friday also expected demand for the short-term securities to be tepid following the recent retail Treasury bond sale, which siphoned off liquidity.
Meanwhile, Ms. De Leon also noted the policy meeting of the central bank on Thursday, where the monetary authority is expected to keep interest rates steady even as inflation is seen to decelerate.
In a BusinessWorld poll, 10 out of 13 analysts said the central bank will likely keep its benchmark rates unchanged on March 21, its second policy meeting for the year, as they would need more inflation data to trim borrowing costs.
Headline inflation clocked in at 3.8% in February, marking the slowest pace in 12 months, although still just below the ceiling of the BSP’s 2-4% target band for this year.
“Also for the US Fed[eral Reserve], they are going to have their own policy meeting coming Wednesday, so with the soft week of US economic data, we see also see that they will continue with its ‘patient’ mantra,” Ms. De Leon added.
Sought for comment, a trader said the auction results were in line with market expectations that rates will pick up by 10 bps from the previous auction.
For this quarter, the government is planning to borrow P360 billion from the domestic market. Some P240 billion will be borrowed this quarter through 12 weekly T-bill auctions. On the other hand, P120 billion worth of Treasury bonds will also be issued through six fortnightly auctions. — Karl Angelo N. Vidal

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