Gov’t makes full award of T-bills as demand pushes yields lower
THE GOVERNMENT made a full award of P15 billion in Treasury bills (T-bills) on Monday after the papers were three to four times oversubscribed on the back of strong investor appetite for shorter-tenored securities as the market remains awash with cash.
Investors wanted to lend as much as P55.12 billion to the government or almost four times the volume of the debt papers placed on the auction block.
The Bureau of the Treasury awarded P6 billion worth of 91day T- bills as planned as total offers reached P23.946 billion, also nearly four times the original offer. These short-termed notes fetched an average rate of 2.148%, up 5.7 basis points ( bps) from the 2.205% yield seen during the May 9 auction.
Similarly, authorities were also able to raise the programmed P5 billion under a 182-day term, after total tenders reached P13.946 billion, nearly three times the government’s offer. Yields rose to 2.494%, coming from the 2.602% average during the previous offering.
It also sold P4 billion worth of 364- day debt papers, which attracted as much as P17.225 billion in total bids, more than four times the programmed offer. The notes came with an average 2.835% rate, 13.10 bps up from the 2.966% seen previously.
At the secondary market before Monday’s auction, the 91day, 182-day and 364-day T-bills were quoted at 2.2893%, 2.8889% and 2.8503%, respectively.
Yields on the three- and six- month papers declined to 2.2605% and 2.8623%, respectively, as the close of trading. Meanwhile, the one-year debt was quoted at a slightly higher rate of 2.8947%.
National Treasurer Rosalia V. De Leon described yesterday’s auction as “short and sweet,” noting that they were “very pleased with the results, very good in [terms of ] the offers made by the GSEDs ( government securities eligible dealers), so we hope that we’ll continue to have this kind of auction henceforth.”
“But I think there’s really very strong appetite on the short end of the curve and there’s also ample liquidity, and then given the recent developments in the US,” the official told reporters yesterday after the auction, referring to the softer- thanexpected US inflation data in April, which only saw an uptick of 1.9%, its smallest gain since October 2015.
Asked if strong demand for the papers reflected the market’s preference for shorter-dated debt notes, Ms. De Leon said, “Yes, there’s really appetite. If you can see, there’s a lot of offers made on the 91-day T-bill, so that just shows the preference for the shorter end of the curve.”
Sought for comment, a bond trader said in a text message yesterday that rates offered by banks in Tuesday’s auction were within market expectations.
Asked on the bid volumes, the trader said, “The liquidity came
from FXTN (fixed rate Treasury note) 03- 21, maturing [ yesterday.] Pretty much expected levels given the amount of maturity,” referring to three-year bonds that matured on Monday which freed up some investors’ cash.
Meanwhile, the National Treasurer added that one possible reason for the strong investor demand for the T- bills was the tempered expectation for a US Federal Reserve rate hike next month.
“There was a really hawkish attitude before on the two rate hikes, but given what has come out of the inflation numbers out of US, I think there might be some dumping in in terms of expectations of the possible rate hike in June. So maybe that’s also one factor why we have a very reasonable submission in the auction [ yesterday],” Ms. De Leon said.
Asked if the government plans to raise offer volumes of the shorter-termed government securities for the third quarter amid ample liquidity, Ms. De Leon said, “I think for now we’re sticking to the program... We’re looking at the same volume.”
The government plans to borrow up to P180 billion locally this quarter — P90 billion each of Treasury bills and Treasury bonds — steady from the previous quarter. It secured P150.602 billion from the sale of governmentissued papers during the first quarter, lower than its P180billion program.