Gov’t partially awards T-bills as yields shoot up

THE GOVERNMENT continued to see mixed results at its Treasury bills (T-bills) auction on Monday, with higher rates requested across all tenors, tracking an increase in US bond yields, and with demand concentrated on shorter-termed papers.

The Bureau of the Treasury was only able to raise P12.4 billion in fresh funds out of the planned P20-billion borrowing at yesterday’s T-bills auction after partially awarding the six-month debt papers and rejecting all tenders for the one-year notes as bids for the longer- termed T- bills were higher than the government was willing to accept.

The Treasury decided to reject all bids the 364-day papers as banks’ requested yields went above the 2% level and with the offer undersubscribed.

The 91-day T-bill fetched a rate of 1.484% in Monday’s auction, up by 20.3 basis points ( bps) from the 1.281% seen at the Oct. 17 offering. The government awarded P8 billion worth of the papers as planned, as appetite remained strong even as the requested rate rose, with tenders reaching P19.29 billion, more than twice the offered amount.

On the other hand, the government partially awarded the 182-day debt papers at a 1.809% yield, higher by 30.4 bps from the previous rate of 1.505%. It only accepted P4.4 billion in bids even as the six-month T-bills attracted P6.8 billion in tenders from investors, still above the programmed P6 billion.

As for the one-year securities, the government decided to reject all bids from investors which reached P4.46 billion, below the offered P6 billion. The Treasury was considering a rate of 2.333% for the papers, higher than 1.88% yield awarded at the previous auction.

At the secondary market before Monday’s auction, the three-month, six-month and oneyear debt notes were quoted at 1.5483%, 3.0364%, and 3.2982%, respectively.

At the close of trades on Monday, the yields on the 91and 364- day T- bills climbed to 1.5667% and 3.3232%, respectively. On the other hand, the 182- day papers saw its rate go down to 2.8796%.

“The 91- and 182- day T- bills fetched average rates of 1.484% and 1.809%, respectively, as rates rose nearing the expected [United States Federal Reserve rate] hike in December coupled with uncertainty following developments in the US elections,” the Treasury said in a statement after the auction.

Deputy Treasurer Sharon P. Almanza told reporters that “The probability of the Fed[eral Reserve] hike by December, tumaas yung probability (the probability increased) so the market is really pricing [that in.]”

She added that the auction result was due to “political uncertainty abroad” as well as investors’ preference for shorter-termed papers.

Ms. Almanza said the new US administration under President- elect Donald Trump fuelled further negative sentiment, explaining that Mr. Trump’s planned initiatives to improve the US economy through robust infrastructure spending will stoke inflation, which could drive the Fed to take action.

A trader interviewed by phone said T-bill rates went higher across all tenors compared to the last auction as “the market has no appetite to take on long-end securities” amid these uncertainties, adding that yields also tracked US Treasuries.

“There is still appetite for the T-bills but investors requested for higher rates,” the trader said. “The 364-day notes were rejected, which is the right thing to do because bids were way too high, above 2%.”

The trader noted that the government is also in a good cash position and need not borrow, especially after its recent auction of 10-year retail Treasury bonds.

During the Oct. 17 auction of T-bills, the government fully awarded the 91- and 182-day debt papers and partially awarded the 364-day T-bills.

The state was only able to raise P17.9 billion in the said exercise. At that auction, the 91day T-bills fetched a rate of 1.281%, while the 182-day debt papers had a 1.505% yield. The 364-day paper was quoted at 1.88%.

The government plans to borrow up to P135 billion from the domestic market this quarter —P60 billion in T-bills and P75 billion in Treasury bonds. •