T-bill rates drop as investors swarm auction

One-year securities once again met overwhelming demand from investors as funds continued to trickle back into the financial system after the holiday season.

According to the Bureau of the Treasury, a total of P37.37 billion in tenders flooded its tap facility for 364-day Treasury-bills (T-bills) on Monday, more than four and a half times higher than the P8 billion offer volume.

The securities were awarded at an interest rate of 6.253 percent, based on the results of the T-bills auction held earlier.

The tap facility allows government securities eligible dealers to access government securities after the initial primary auction.

Access to this window, however, is limited only to the BTr’s top 10 “market makers” as part of their privileges.

During the primary auction, the rates fetched by 364-day T-bills slumped by 38.8 basis points to 6.253 percent from 6.641 percent in the previous auction.

Investors swarmed the P8 billion offering with P43.724 billion in total tenders, prompting the BTr to upsize the awarded volume to P11.2 billion.

The healthy demand also allowed the BTr to open access to the tap facility.

Meanwhile, rates for the 91-day Treasury bills (Tbills) averaged 5.396 percent, 1.5 basis points lower than 5.411 percent in the previous auction. Six-month debt papers were also awarded at an average rate of 6.154 percent, down by 27 basis points from 6.424 percent.

According to De Leon, the securities received overwhelming demand due to robust liquidity, with funds now returning to the financial system after the holiday break.

She said there is also demand from offshore investors given the strengthening of the peso against the dollar.

The national treasurer also cited lower inflationary expectations this year, causing banks and investors to lean into the longer-end of the curve.

For 2019, the national government is programmed to borrow P1.19 trillion, 20 percent higher than last year’s borrowing program of P986 billion. Of this amount, P891.7 billion is expected to come from domestic lenders.

Economic managers earlier increased the borrowing program for this year in expectation of the higher fiscal deficit ceiling, which is set at 3.2 percent of the gross domestic product (GDP) this 2019.