Investors push for higher rates for longer tenors

MANILA, Philippines — The Bureau of the Treasury (BTr) yesterday fully awarded 91-day Treasury bills (T-bills), but only partially awarded 182-day and 364-day securities as investors asked for higher rates for the longer dated tenors.

During yesterday’s auction, T-bills maturing in 91 days fetched an average rate of 3.404 percent, eight basis points lower than the 3.484 percent recorded the previous auction last week.

As a result, the auction committee decided to fully award the P4 billion offering. Total bids reached P14.438 billion, more than three times higher the issue size.

On the other hand, the auction committee decided to cap accepted rates for 182-day securities, resulting in a partial award of P3.04 billion out of the P5 billion offer volume.

This tempered the increase in the average rate of the three-month debt papers, which settled at 3.937 percent, 6.4 basis points up from last week’s 3.873 percent.

The auction was slightly oversubscribed with total tenders amounting to P5.27 billion.

The BTr, likewise, put a cap on the awarded bids for 364-day T-bills yesterday. Out of the P6 billion issue size, only P4.03 billion was awarded.

As a result, rates for the one-year securities averaged 4.566 percent, 13.7 basis points up from 4.429 percent.

Total bids reached P6.804 billion, slightly above the original volume.

According to National Treasurer Rosalia De Leon, the increase in the rates for three-month and one-year T-bills may be attributed to continued market concerns on inflation, as well as expectations of further rate hikes on the part of the Bangko Sentral ng Pilipinas (BSP).

“You see except for the 91-day, both the 182 and 364-day moved up and that’s because of the median inflation forecast of 4.7 percent. And they are expecting, because of the peso depreciating, they say that BSP needs to hike again. So they are already putting cushion in terms of the yields for these two tenors,” De Leon said.

Despite this, the treasurer said the auction still showed positive results, as it reflects that there is still appetite and liquidity in the domestic market.

Meanwhile, De Leon said the government is eyeing a total volume of $1 billion for its planned US-dollar denominated global bonds this year. She said part of the amount raised from the issuance could be used to settle the maturities due in the early part of 2019.