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Gov’t makes partial award of Treasury bills as yields on longer tenors rise

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THE GOVERNMENT made a partial award of Treasury bills (T-bill) it offered on Monday as yields for longer tenors went up amid weaker demand.

The Bureau of the Treasury (BTr) raised just P7.1 billion out of the P15 billion programmed for Monday’s T-bill auction, making a full award of the 91-day papers and a partial award for the 182-day tenor while rejecting all bids for the 364-day papers amid mixed demand for the securities.

The BTr awarded P4 billion worth of 91-day papers as planned out of P10.59 billion in tenders. Strong demand caused the tenor’s average yield declined to 5.608% from 5.614% last week.

Meanwhile, the government accepted just P3.1 billion in tenders for the 182-day T-bills even as total bids stood at P8.35 billion, well above the offered P5 billion, as it capped a rise in yields. The paper’s average rate came in at 5.996%, higher than last week’s 5.987%.

The Treasury also rejected P7.66 billion worth of bids for the 364-day papers as rates quoted were well beyond what the government was willing to pay.

Last week, the government also made a partial award of the T-bills it placed on the auction block, borrowing just P7.264 billion out of the programmed P15 billion as it likewise rejected all bids for the one-year papers.

At the secondary market on Monday, yields on the three-month, six-month, and one-year T-bills stood at 5.702%, 5.97%, and 6.088%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

After the auction, National Treasurer Rosalia V. De Leon said the government made a partial award of the short-tenored papers as it has room to reject high bids due to its cash position.

“We still see that there’s more room for rates to decline given the expectations on the inflation trend and at the same time of course, we are really bountiful with cash,” Ms. De Leon told reporters.

Ms. De Leon noted that the government is being “prudent” in borrowing given its current fiscal deficit position amounting to P90.2 billion in the first quarter, lower than the P162.2 billion incurred in the same period of the previous year.

“It’s just really that we are also borrowing prudently… [W]e have to maintain a healthy cash position so we will be able to sufficiently meet our requirements and provide also the adequate buffer because we are not just looking at 2019… For example, what if markets go against us next year and even in the coming months? That’s why there must be anticipation,” Ms. De Leon said.

A bond trader said the auction results were expected given the market’s preference for the shortest tenor.

“As expected, yields went up for the 182-day and slightly lower for the 91-day because of the demand for the shorter tenor because the issuance size is only P4 billion, so there’s a stronger demand for the short tenor,” the trader said.

“For the long end, it is slightly higher — that’s why BTr rejected the one year,” the trader added.

The government plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion in Treasury bonds.

It plans to borrow some P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product.

SAMURAI BONDS
Meanwhile, Ms. De Leon said the Treasury is looking to offer yen-denominated or samurai bonds in August.

“We are looking at the same — three and five years [in tranches] but that depends if we are borrowing more than what we have borrowed last time. Then we may have to look for another tenor bracket, but otherwise, three years,” Ms. De Leon said.

“We can look at one tenor if we are issuing smaller volume otherwise if there is appetite then we can look for a longer tenor,” she added.

In August last year, the state returned to the Japanese market through the issuance of multi-tranche samurai bonds worth 154.2 billion yen, or about $1.39 billion.

On the other hand, Ms. De Leon said the government is still waiting for approval of its planned issue of panda or yuan-denominated bonds from the People’s Bank of China and the National Association of Financial Market Institutional Investors. — RJNI

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