Gov’t makes partial award of T-bills as yields move higher

THE GOVERNMENT saw mixed results at its Treasury bills (Tbills) auction on Monday following higher rates requested for all tenors, with demand concentrated on shorter-termed notes as investors remained on the sidelines ahead of the US Federal Reserve’s policy meeting next week.

The Bureau of the Treasury was only able to raise P11.058 billion out of the planned P20- billion borrowing at yesterday’s T-bills auction after the government decided to partially award the sixmonth debt papers and reject 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.

National Treasurer Roberto B. Tan told reporters after the auction: “Of course it’s driven mainly by the Fed meeting that’s being anticipated so a lot of positions were for shorter term,” adding that even the Bangko Sentral ng Pilipinas’ ( BSP) recent auction of term deposits was undersubscribed, with investors “even probably [ holding] in cash.”

The central bank’s Dec. 1 auction under its term deposit facility ( TDF) was undersubscribed after a higher volume was offered, with both tenors fetching higher yields.

“So a lot of players are now standing on the sidelines and probably will be waiting for the Fed decision and even probably waiting for the reaction of the Bangko Sentral on Dec. 22,” Mr. Tan said.

The BSP will hold its policy meeting on Dec. 22.

The 91-day T-bill fetched a rate of 1.555% in Monday’s auction, up by 7.1 basis points ( bps) from the 1.484% seen at the Nov. 14 offering. The government awarded P8 billion worth of the papers as planned, as appetite remained strong even as the requested rate slightly rose, with tenders reaching P11.21 billion.

On the other hand, the government partially awarded the 182- day securities at a 1.876% yield, higher by 6.7 bps from the previous rate of 1.809%. It only accepted P3.058 billion in bids as the six- month T- bills attracted only P5.218 billion in tenders from investors, below the programmed P6 billion.

As for the one-year debt papers, the government decided to reject all bids from investors which reached P3.55 billion, well below the offered P6 billion as requested rates broke the 2% level. The Treasury was considering a rate of 2.088% for the papers before deciding to reject bids.

At the secondary market before Monday’s auction, the three-month, six-month and oneyear debt notes were quoted at 1.8168%, 1.8286%, and 3.2933%, respectively.

At the close of trades on Monday, the yields on the 91- and 182-day T-bills were unchanged. On the other hand, the 364-day papers rallied to fetch a lower rate of 2.9633%.

A trader interviewed by phone said T- bill rates were higher across all tenors compared to the yields seen in last auction since “it’s just a market play… It’s more practical to invest in short-term

[debt] rather than long-term because everyone’s view is that the rates will go up.”

“In terms of demand, if you are faced with an increasing rates scenario, you would rather invest in shorter-termed [debt] because at least your money won’t be locked up in a longer-termed security once rates go up,” the trader added. “Since everyone agrees that interest rates will go up, it’s more practical for them to invest in shorter-termed securities and if ever they get hit with higher rates, their loss won’t be that big.”

During the Nov. 14 auction of T-bills, the government fully awarded the 91-day debt papers and partially awarded the 182-day notes, while rejected bids for the 364-day T-bills.

The state was only able to raise P12.4 billion in the said exercise. At that auction, the 91-day T-bills fetched a rate of 1.484%, while the 182-day debt papers had a 1.809% yield.

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.