THE AUCTION of P15 billion worth of Treasury bills (T-bills) on Monday saw mixed results as investors swarmed the shorter-dated securities but avoided the longer tenors amid continued uncertainty in financial markets.
The government raised a total of P8.63 billion during yesterday’s auction of the shorter-tenored securities, just a little over half of the P15 billion it offered, even as total tenders reached P24.49 billion.
The Treasury fully awarded P5 billion in three-month debt papers with tenders reaching three times as much at P15.153 billion. The average yield on the T-bills dropped to 3.485% from 3.597% in the previous auction.
Meanwhile, it partially awarded the P4-billion worth of six-month papers it offered, accepting just P3.362 billion in bids as rates rose, even as the auction volume was oversubscribed, with tenders reaching P6.357 billion. Yields sought by banks increased to 4.019% from 3.889% previously.
However, the government rejected all bids for the one-year securities as its P6-billion offer was undersubscribed, attracting just P2.98 billion in tenders. The papers also fetched higher yields, jumping to 4.263% from 3.986% in the previous auction.
At the secondary market at noon, the three- and six-month T-bills were quoted at 3.7846% and 3.8299%, respectively, and 4.3635% for the one-year papers.
At the close of trading, the 91-day T-bill saw its rate drop to 3.4778%, while yields on the 182-day and 364-day papers climbed to 3.8326% and 4.3661%, respectively.
Deputy Treasurer Erwin D. Sta. Ana said rates bid by banks for higher-dated tenors climbed due to higher inflation expectations, which heightened bets of policy tightening from the Bangko Sentral ng Pilipinas (BSP).
Meanwhile, the 91-day papers, being the shortest tenor, saw its yield decline on the back of the country getting a “positive” outlook on its credit score from S&P Global Ratings last Thursday.
“We are somewhat expecting that because of the change in the credit rating outlook by S&P. So, to some extent, that has impact on that. But as you can see, with respect to the other tenors, that’s where the demand weighed a bit. So it’s really because of the usual uncertainties [as] the markets are waiting the inflation report, the action of the Monetary Board [and] whether they will move or not in their May 10 policy meeting,” Mr. Sta. Ana said after yesterday’s auction.
“We don’t want to reject, but if we see that the rates are way off market expectations, then we would really be forced to do so,” he added.
A BusinessWorld poll of 11 economists showed a 4.5% median forecast for April, which if realized will be higher than the 4.3% booked in March using 2012 as the base year.
The government will report official inflation data on Friday.
Mr. Sta. Ana said the government’s improved tax collection performance is giving the Treasury room to reject some bids.
“We are always dependent on the performance of the revenue side. We also look at the disbursements, but the revenues side, the BIR (Bureau of Internal Revenue) and the BoC (Bureau of Customs) are doing well. On the expenditure side, there’s been a pickup but it’s been covered adequately. We are still within deficit targets so there’s nothing to worry about,” said Mr. Sta. Ana.
The BIR raked in P423.1 billion in the first quarter, exceeding its P361.8-billion target, while the BoC raised P129.8 billion, a tad higher than its P129.5-billion goal.
A trader meanwhile said the market was more upbeat than expected on news of the “positive” credit rating outlook from S&P.
“We only initially expected a sideways movement for the three months — even a slight increase of five basis points. But investors seem to have flocked to the shorter tenor that saw lower average yields, versus the longer ones,” the trader said in a phone interview yesterday.
“As we expected, the longer-dated ones continued to see higher yields and weak demand. This may be due to positioning ahead of the BSP’s meeting, as well as the Fed[eral Reserve] this first week of May,” another trader said in a phone interview.
Both traders noted that the market has already factored in a likely increase in benchmark rates in their bids.
“They have been anticipating it for a while now. As the BSP governor said, it’s just a question of when. It is also supported by the climb in US Treasuries,” the first trader said.
The government wants to raise P325 billion from local creditors this quarter through weekly auctions of securities.
It is holding two auctions per week — one for T-bills and another for Treasury bonds — than the previous one auction a week as it increased its borrowing requirements for the period. — EJCT

RELATED ARTICLESMORE FROM AUTHOR