Gov’t makes full award of T-bills as demand pushes yields lower
THE GOVERNMENT raised P15 billion from its offer of Treasury bills (T-bills) yesterday amid overwhelming demand, as investors scrambled to get hold of shorter-termed instruments in anticipation of a rate hike in the United States next week.
Debt papers offered by the Bureau of the Treasury fetched P51.826 billion in total tenders, over three times what the government planned to raise during Monday’s auction. As a result, rates moved sideways, and even went slightly lower for the threemonth and six-month notes.
The government decided to fully award P6 billion worth of 91- day T- bills, as total offers reached P25.08 billion. These short-termed papers fetched an average yield of 2.103%, slipping from the 2.148% quoted during the May 22 offer.
The Treasury also raised P5 billion from the 182- day notes, which received nearly triple bids at P14.677 billion. The average rate trended lower at 2.456% versus the 2.494% fetched during the previous T-bills auction.
The government also awarded P4 billion in 364-day papers on Monday as it received tenders amounting to P12.069 billion, which came alongside a slight rise in the average rate for the tenor. The notes came with an average 2.85% rate, which inched higher from 2.835% previously.
Before Monday’s auction, the three- month, six- month and one-year papers were quoted at 2.6714%, 2.8682, and 2.87%, respectively, at the secondary market as of noon.
As trading closed, the yield on the 91-day Treasury bill was steady at 2.6714%. The 182-day papers rallied to fetch 2.1825%, and the 364-day securities also saw its rate inch down to 2.8618%.
REBALANCING
National Treasurer Rosalia V. De Leon said the auction results showed the market remains awash with cash, on the back of a rebalancing in the central bank’s term deposit facility (TDF) and ahead of the US Federal Reserve’s policy meeting next week.
“We have a good auction given that liquidity is on the short end of the curve. That is probably because by June, trust (entities) should be pulling out of the TDF,” Ms. De Leon told reporters after the auction, referring to the scheduled phase-out of the trust firms in placing their excess funds under the central bank’s facility.
Ms. De Leon added that the Treasury decided to make a full award despite its “healthy” cash position as the rates submitted stood “reasonable.”
“While there is the expectation of a possibility of a June rate hike, still the BSP (Bangko Sentral ng Pilipinas) and even the consensus of economists is that domestic inflation will remain within target — in fact, it might even be a tad lower than what we had in the previous month. Overall, I think there is really reason to see that... there is not much room [for rates] to go up, but mainly to be within the range we are forecasting,” the Treasurer also said.
Inflation is seen to remain within the 2- 4% target band in
May, with a BusinessWorld poll pointing to a 3.3% median forecast and a 2.9- 3.7% range from the central bank.
Sought for comment, a bond trader said local yields likely moved alongside US Treasuries, which came after weak jobs creation data announced on Friday.
“Yields for US Treasuries were also lower so it (T-bills) tracked US Treasuries. The non- farm payrolls were lower than expected, so that had an effect,” the trader said by phone.
“Investors crowd the short end because it’s safer with the one-year tenor and below. They went to the T-bills given the weak non- farm payrolls data and US Treasury yields, despite fears of a Fed rate hike this month.”
The US Labor Department reported that job growth slowed to 138,000 in May, lower than the new jobs added in April.
The Fed will hold its rate-setting meeting on June 13-14. Traders are pricing in an 87% chance that the central bank will introduce a fresh 25-basis-point hike, Reuters said in a report, which if realized will be the second tightening move this year.
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.