Gov’t makes full award of Treasury bills
THE GOVERNMENT fully awarded the Treasury bills (Tbills) it offered yesterday on the back of strong appetite from investors across all tenors, with rates sought by banks clocking in within market estimates amid excess liquidity in the financial system.
The Bureau of the Treasury raised P15 billion as planned from its auction of 91-day, 182-day, and 364-day securities during its auction on Monday, with total bids reaching P35.34 billion, more than twice the government’s offer.
“The auction was quite a success [ yesterday], all tenors are fully subscribed and we have received bids totalling to about P35 billion versus the offer size of P15 billion. This represents the market’s preference for short tenors and of course, it’s also an indication that the system is pretty liquid,” Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction.
The government raised P6 billion from the 91-day T-bills as planned after banks wanted to buy as much as P17.443 billion in the three-month papers. The debt papers fetched a rate of 2.374% during Monday’s auction, 1.4 basis points ( bps) higher than the 2.36% yield seen during the Feb. 27 auction.
Similarly, the Treasury bureau was also able to raise P5 billion from the three-month Tbills as programmed. Bids for the 182-day papers reached P11.235 billion or more than twice the offer, with the T- bills fetching an average rate of 2.606%, up 1.9 bps from the 2.587% seen two weeks ago.
Lastly, the government also made a full P4- billion award of the 364-day securities, with total tenders coming in at P6.665 billion. The debt papers were quoted at 2.799%, 3.6 bps higher from the 2.763% yield fetched during the previous exercise.
Asked if yields sought by banks were expected by the government, Mr. Sta. Ana said: “It’s expected given that preference is on shorter- dated notes… We feel that it’s within our estimates internally also, so we’re pretty aligned with the results.”
At the secondary market before yesterday’s auction, the 91day, 182-day and 364-day T-bills were quoted at 2.226%, 2.3336% and 3.1696%, respectively.
As trading closed, yields on the six-month and one-year papers were unchanged from the noon levels, while the rate of the one- month T- bill inched up to 2.2258%.
During the Feb. 27 T-bills auction, the government was only able to raise P12.4 billion out of its planned P15-billion borrowing after it partially awarded the debt papers amid a jittery market, despite banks wanting to buy as much as P23.1 billion worth of the offered securities.
‘WELL RECEIVED’
Sought for comment, a bond trader said in a phone interview yesterday, “The auction was well received and yields were in line with market expectation. Prior to the auction, market’s indication was flat for the 91-day and higher for the one-year notes. So it’s in line with market indication and rates were almost the same as the previous auction.”
Asked why rates were almost flat in yesterday’s exercise, the trader said, “Markets have already priced in the expectation of a rate hike by the US Federal Reserve.”
Reuters reported, citing CME Group’s FedWatch tool, that Fed fund future prices showed markets now pricing in an above 90% probability that there will be an increase in borrowing costs during the Fed’s Federal Open Market Committee (FOMC) meeting on March 14-15.
Mr. Sta. Ana said investors are keeping watch on the long-awaited FOMC meeting. “That is what the market has been anticipating for quite some time, [and] the labor data coming out of the US are actually conducive to such a move by the Fed.”
Latest data from the US Labor Department last week bared nonfarm payrolls soared by 235,000 jobs in February on the back of the construction sector’s surge in nearly ten years to 58,000, its largest gain since March 2007.
The bond trader added that investors have more appetite for shorter-dated papers for now.
“For now, they pretty much prefer the shorter-termed notes because with increasing rates, you would much prefer the short end so that in the case that there will be an interest rate hike, the risk of rates further increasing on your part would be eliminated,” the trader said.
For this quarter, the government is looking to raise as much as P180 billion from T- bills and Treasury bonds to fund its spending plans, with the Duterte administration looking to raise the budget deficit to 3% of gross domestic product.