T-bills partially awarded

THE GOVERNMENT made a partial award of the Treasury bills (T-bill) it planned to raise on Monday as investors flocked to the shorter tenors.
The Bureau of the Treasury borrowed P8.82 billion during yesterday’s auction. The P15-billion offering was oversubscribed, attracting tenders worth P18.29 billion.
Broken down, the government fully awarded P5 billion worth of 91-day T-bills, with bids reaching P11.527 billion. The paper fetched an average yield of 3.493%, up from the 3.346% quoted at last week’s auction.
For the 182-day tenor, only P2.08 billion of the P3.33 billion that banks and financial firms wanted to lend was accepted, below the P4 billion the Treasury intended to borrow. The average yield rose to 3.684% from 3.206% last week.
Meanwhile, the government borrowed only P1.735 billion via the 364-day T-bills as tenders reached about P3.435 billion, below the P6-billion offer. Yields fetched likewise rose for the one-year paper at 3.83% from the 3.434% in the last auction.
At the secondary market before the auction, the three-month papers were quoted at 3.6643%, while the six-month tenor fetched 3.8933%. The yield on the one-year T-bill was at 4.2786%.
Yields on the 91-day and 182-day T-bills rose to 3.417% and 3.9017%, respectively, as trading closed, while the rate of the 364-day papers was unchanged.
After the auction, Deputy Treasurer Erwin D. Sta. Ana told reporters that banks preferred to place their funds in the shorter-dated three-month securities amid uncertainties over the US Federal Reserve’s rate path.
“Our GSEDs (government securities eligible dealers) are favoring the shortest [tenor] on issue. Basically, we think that it’s about the hawkish stance of the Fed,” Mr. Sta. Ana said.
Reuters reported that all US Federal Reserve officials felt that the American economy would firm and that inflation would rise in the coming months, minutes of the March meeting of the Federal Open Market Committee released last Thursday showed.
“I think… the three rate hike cycles are still on the table,” Mr. Sta. Ana said.
Expectations for the Fed to hike its interest rates this year heightened after Boston Fed President Eric S. Rosengen suggested that the central bank could end up hiking its benchmark rates more than three times this year on the back of the robust US economy.
Meanwhile, the deputy treasurer added that geopolitical tensions in the Middle East were also factored in by the market.
Last week, the White House announced that American, British and French military forces struck what is believed to be a chemical weapons facility in Damascus, Syria as a retaliatory response to the suspected chemical attack.
In response, Russia vowed to respond to any attack on its ally, adding that the Syrian military had intercepted 71 of the missiles fired.
“There’s a new development in geopolitical perspective in Syria so market is also factoring that, as well as the inflation picture domestically,” the deputy treasurer said.
Mr. Sta. Ana added that the Treasury can still afford to reject bids since it has a healthy cash position.
“We still sit comfortably with our cash position so I think we have some leeway with respect to the bids submitted by our GSEDs,” he said.
Meanwhile, a trader said the auction result is within the expectations “given the market’s outlook for [faster] inflation.
Inflation has been on a steady ascent for four months, hitting a three-year peak at 4.3% in March under the 2012 base year amid rising fuel prices and higher commodity costs due to the tax reform law.
The trader added that the “market is also trying to adjust to the more frequent auctions of the government for additional supply.”
Starting this month, the Treasury will be holding two auctions per week — one for Treasury bonds and another for T-bills — to reflect increased borrowing requirements for the quarter.
The government is set to borrow P325 billion from the domestic market in the second quarter of the year through auctions of securities.
It 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. — Karl Angelo N. Vidal