THE GOVERNMENT increased its award of Treasury bills (T-bills) on Monday as yields mostly declined on the back of strong liquidity in the financial system and as investors continued to favor short-dated debt.

The Bureau of the Treasury (BTr) borrowed P22 billion via the T-bills it auctioned off on Monday, more than the programmed P20 billion, as the offer was over four times oversubscribed, with bids amounting to P80.407 billion.

Broken down, the BTr awarded P7 billion in 91-day papers, higher than the P5-billion program, as tenders reached P24.631 billion. The three-month debt fetched an average rate of 1.019%, down by 0.5 basis point (bp) from the 1.024% seen in the previous auction.

The government accepted more bids from non-competitive investors for the three-month securities to take advantage of the lower average yield.

Meanwhile, the Treasury awarded P5 billion in 182-day T-bills as planned as bids for the tenor amounted to P22.246 billion. The six-month papers were quoted at an average rate of 1.443%, 1 bp lower than the 1.453% logged in last week’s offering.

Lastly, the government borrowed the programmed P10 billion via 364-day T-bills as tenders reached P33.53 billion. The average rate of the one-year securities stood at 1.745%, steady from the previous week’s auction.

At the secondary market on Monday, the 91-day, 182-day and 364-day T-bills were quoted at 1.094%, 1.465% and 1.782%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said the lower yields fetched for the T-bills yesterday indicated ample liquidity among investors and continued strong preference for short-term debt.

“It was a full award with double accepted bids from the non-competitive sector for 91-day papers. Hefty liquidity prevails [in the market] with magnetic appeal of short tenors,” Ms. De Leon told reporters in a Viber message after the auction.

A trader said the Philippines’ soft economic performance and a benign inflation outlook resulted in continued demand for shorter tenors.

“Inflation is expected to remain benign in the short-term. However, as the pandemic lingers, investors are still wary of economic risks in the long run. Stronger indicators for economic growth are still needed,” the trader said in an e-mail.

The overall year-on-year increase in prices of widely used goods rose to its fastest pace in three months in October, the government reported earlier this month.

Preliminary data from the Philippine Statistics Authority (PSA) showed headline inflation at 2.5% in October, picking up from the 2.3% pace the month before.

The October inflation result marked the fastest pace in three months or since the 2.7% reading in July 2020.

The latest headline figure is higher than the 2.4% median in a BusinessWorld poll conducted late last week and falls within the 1.9-2.7% estimate given by the Bangko Sentral ng Pilipinas (BSP) for October.

Year to date, inflation settled at 2.5%, still within the BSP’s 2-4% target this year, but above its 2.3% forecast for the entire year.

Meanwhile, the Philippine economy continued to shrink for a third straight quarter, although at a slower pace compared with the previous three-month period, as lockdown restrictions were further loosened amid the coronavirus pandemic.

The economy remained in recession as gross domestic product (GDP) contracted by 11.5% in the third quarter after the 16.9% plunge in the second quarter, the PSA reported last week. GDP grew by 6.3% in the third quarter of 2019.

A BusinessWorld poll of 19 economists showed a median forecast of a 9.2% decline in the third quarter.

Year to date, Philippine GDP shrank by 10%. The government expects the economy to contract between 4.5%-6.6% this year.

The BTr will auction off reissued 10-year bonds worth P30 billion on Tuesday, Nov. 17. The papers have a remaining life of four years and nine months.

The Treasury plans to borrow P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly Treasury bond auctions.

It is also offering another tranche of Premyo bonds to raise at least P3 billion. The offer period is set to run from Nov. 11 to Dec. 18.

Premyo bonds are part of the government’s bid to attract more small investors to invest in government securities. Last year, the BTr raised P4.961 billion from the sale of one-year peso-denominated Premyo bonds, up from its initial offer of P3 billion.

Premyo bonds are government securities that have corresponding raffle numbers for cash and non-cash prizes, aside from earning interest. The minimum investment for the bonds stands at just P500 and can be bought in multiples. One Premyo bond is equivalent to one raffle ticket.

The government wants to raise around P3 trillion this year from local and foreign lenders to help fund its budget deficit, which is expected to hit 9.6% of the country’s gross domestic product. — KKTJ

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