Gov’t upsizes Treasury bill award as bids for 364-day papers surge

TREASURY BILLS (T-bill) offered yesterday saw strong demand, with the government upsizing its award for the longest tenor even as it partially awarded the 91-day papers and even opening its tap and over the counter (OTC) facilities to accommodate bids.

The Bureau of the Treasury (BTr) borrowed P22.405 billion via the T-bills yesterday, higher than its initial P20-billion program and the P16.72 billion raised during the previous auction of the shorter-termed debt.

Bids from market participants totalled P66.939 billion, with the bulk of the demand going to the longest tenor, causing the government to award more 364-day papers than originally intended, which also more than filled the partial award it made for the 91day debt.

Broken down, the Treasury borrowed just P5.205 billion through the 91-day T-bills out of the programmed P6 billion. Its average yield declined 1.5 basis points (bp) to 5.396% from the 5.411% fetched during the previous auction.

The government meanwhile made a full award of the 182day papers, accepting P6 billion as planned out of total offers amounting to P17.26 billion. The average rate for the papers went down 27 bps to 6.154% from last week’s 6.424%.

For the 364-day securities, the government borrowed P11.2 billion, higher than the P8-billion program as it doubled the accepted non-competitive bids allowed by the Finance Department’s Order 141-95. Demand from investors amounted to P43.724 billion.

The paper’s average rate likewise slid 38.8 bps to 6.253% from the 6.641% quoted for the previous award.

To maximize the strong demand, the government opened a tap facility for the one-year papers from 2 to 4 p.m. yesterday to raise up to P8 billion more. It was made available to the 10 financial institutions earlier named as market makers.

On the other hand, the Treasury also opened the OTC sale of the 91-, 182- and 364-day instruments to government-owned and -controlled corporations.

Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, sixmonth and one-year papers were quoted at 5.795%, 6.373%, and 6.647% yesterday, respectively.

National Treasurer Rosalia V. De Leon said the government received huge demand for the T-bills auction amid liquidity in the market.

“Their cost of funding right now is maybe higher if they are offering time deposit which is also higher, so they have to get much higher compensation for the investment,” she said yesterday following the auction.

Ms. De Leon said there is liquidity in the market as indicated by the stronger local currency and the rise of the stock market.

“[We’re seeing] liquidity in the sense that after Christmas break, they’re all coming back, and given the peso has been strengthening,” she said. “There’s an inflow even for the stocks. We see foreign buying also in the markets. We see that there’s also demand from offshore.”

Sought for comment, a bond trader said yesterday’s auction results were “in line with market expectations” as the rates were down by 20-30 bps from last week’s auction, adding that the “stronger peso” continued to drive demand.

The peso has been strengthening against the dollar in the past few trading sessions amid increased market appetite for riskier currencies.

The government plans to raise P360 billion this quarter through domestic means. Some P240 billion will be borrowed through 12 weekly T-bill auctions during the three-month period, while P120-billion worth of T-bonds will also be issued through six fortnightly auctions. •