Gov’t partially awards T-bills as demand wanes on cautiousness

THE GOVERNMENT was only able to raise P9.09 billion in fresh funds from its first auction of Treasury bills (T-bill) for the year amid tepid demand from investors, with banks seeking higher returns due to market jitters amid global uncertainties.

Banks only wanted to buy as much as P11.54 billion worth of Tbills at Monday’s auction — well below the Bureau of the Treasury’s planned P15 billion — asking for yields way above the rates seen at December’s T-bills sale.

The 91-day T-bills only attracted a total of P4.35 billion in tenders, well below the programmed P6 billion, with the government awarding only P3.7 billion worth of the debt. The papers fetched a rate of 1.780% at yesterday’s auction, up by 22.5 basis points ( bps) from the 1.555% awarded during a Dec. 5 auction.

Meanwhile, bids on the 182day debt papers broke the 2% level, with the average rate coming in at 2.037%, 16.1 bps higher than the previous rate of 1.876%. The six-month T-bills were met with just P4.66 billion in tenders and the government accepted just P4.21 billion, lower than the planned P5-billion borrowing.

Likewise, the 364- day notes were undersubscribed after the tenor attracted just P2.98 billion in bids, with the government awarding only P1.18 billion, less than half of the programmed P4 billion. The yield on the one-year T- bill also went above the 2% level after it was quoted at 2.276% yesterday, up by 39.6 bps from the 1.88% the securities fetched at an Oct. 17 auction.

At the Dec. 5 auction, the government partially awarded the T- bills on offer to manage borrowing costs after yields rose across the board despite strong demand from banks. The Bureau of the Treasury raised just P11.058 billion out of the planned P20- billion borrowing, making a full P8-billion award of 91-day debt papers and a P3.058-billion partial award of 182-day securities. It rejected bids for the 364day notes.

The government last sold oneyear T-bills at a Oct. 17 auction, where it partially awarded the securities for a yield of 1.88%. It accepted only P3.91 billion in tenders, below the P6 billion it offered.

National Treasurer Roberto B. Tan said the undersubscrip-tion across all tenors was due to investors preferring to stay on the sidelines amid uncertainties in the market, particularly the anticipated inauguration of US President-elect Donald J. Trump on Jan. 20.

“People are still on the sidelines, I think waiting for some events... the ‘Trump factor’ mainly, I think. Some negative news from the market’s perspective came up with the coming [of the] US president,” he told reporters after the auction.

Market players were disappointed with Mr. Trump’s first news conference held last week as he failed to provide details on his future plans of boosting fiscal spending and trimming taxes.

“So what we did was really follow the market trend based on price guidance on R1 and R2, and our attitude in this auction was really to provide price guidance following behavior of the Bangko Sentral [ ng Pilipinas] ( BSP) on its borrowing rates, TDF ( term deposit facility) and other indicators,” Mr. Tan added, referring to the noon and closing levels of bonds at the Philippine Dealing & Exchange Corp.

Mr. Tan noted that the government is currently in a good cash position despite the undersub-

scription across all tenors yesterday.

“This is not really something for us to replenish. We have a good position right now,” he said.

At the secondary market before the auction, the 91- day, 182-day and 364-day notes were quoted at 2.0411%, 2.1732% and 2.2394%, respectively. Yields on the three- and six-month tenors went up to 2.0446% and 2.1982%, respectively, while the one-year paper’s rate slipped to 2.2354%.

A bond trader said in a phone interview yesterday that the increase in supply of debt papers was the main reason for yesterday’s results as the Bureau of the Treasury now holds auctions on a weekly basis.

“Since the Treasury’s auction [for T-bills] is now twice a month, investors have the option to bid on the next auction, so there’s more flexibility for them to decide whether to invest now or at the end of the month. [I]t’s really a supply issue,” the trader said.

Asked why the government decided to hold auctions weekly this quarter from its previous practice of holding just one T- bills and Treasury bonds ( Tbond) auctions a month, Mr. Tan told reporters yesterday that the auction schedule was adjusted because of volatile market environment. “Investors are not very confident so [it’s] better [to have volumes that are] bite-size.”

The bond trader also noted that some players “might also be on the sidelines because it’s the start of the year, while some are looking at Mr. Trump’s inauguration as an event risk.”