Treasury curbs investor zeal, rejects bids for 364-day T-bills

Photo shows the facade of the Bureau of the Treasury building.

The Bureau of the Treasury raised only P12 billion out of the P20 billion programmed offering on Monday ahead of the maiden securities offering of Bangko Sentral ng Pilipinas (BSP).

This after the Treasury rejected bids for 364-day debt papers while fully awarding bids for 91-day and 182-day tenors.

National Treasurer Rosalia V. De Leon told reporters they had to reject bids for the 364-day debt papers as the average rate would have been a 16-basis point increase compared to the rate from the previous auction. It would have also been above the secondary market level, De Leon explained.

The tenor attracted P14.705 billion in total tenders.

“Banks [are] positioning in anticipation of maiden BSP offering as well as outcome of the Fed’s policy meeting this week,” De Leon said.

The US Federal Reserve is set to meet amid a prolonged deadlock on the passage of a new economic stimulus bill.

The BSP, meanwhile, announced last week it will start unloading securities on September 18 as part of its shift to more market-based monetary options. BSP Bills and Bonds would be offered via auction.

Total bids for Monday’s auction reached P54.1 billion; more than twice the volume offered.

With the auction ended up being oversubscribed, the Treasury decided to double the accepted non-competitive bids for the 91-day securities to P4 billion, raising the total volume awarded for the tenor to P7 billion.

The tenor fetched a rate of 1.150 percent, which was 1.7-basis points (bps) down from the 1.167 percent in the previous auction. The security also attracted tenders of P26.31 billion.

Meanwhile, the 182-day Treasury bills (T-bills) posted a higher average rate of 1.589 percent, rising by 7.1 basis points from 1.518 percent in the previous auction. The paper attracted P13.13 billion in total bids; more than twice the P5-billion offer.

For its initial offering, the BSP said it will auction 28-day BSP bills with an indicative offer volume of about P20 billion subject to confirmation two days before the actual auction date.

According to the BSP, auction volumes will be small at the outset but will be gradually scaled up relative to market response and consistent with liquidity forecasts.

On Friday, President Duterte also signed into law the Bayanihan to Recover As One Act, paving the way for the release of P165 billion to rehabilitate an economy in atrophy.

The Bayanihan 2 law also enabled the hike of BSP’s cap on lending to the government.

Sought on whether the Treasury is eyeing to tap this facility soon, De Leon said tapping this facility would help government to fund the spending requirements against Covid-19 and pursue a quick-recovery path.

“Bayanihan 2 [is] adequately covered by debt service savings and additional income,” she said.

For this month, the Treasury is set to borrow a total of P160 billion from the local debt market this month. This is slightly lower than the P170 billion it programmed in August.

The government borrows to finance its spending requirements as well as to cover its budget deficit.

As tax collections plunged with lockdown measures to contain the pandemic, the Development Budget Coordination Committee (DBCC) is projecting the country’s budget deficit to more than double to 9.6 percent of gross domestic product (GDP) or P1.815 trillion from only 3.4 percent of GDP or P660.2 billion last year.

The DBCC also expects the country’s debt-to-GDP ratio this year to increase to 53.91 percent of GDP—a level that it hasn’t seen in over a decade—from a record-low of 39.6 percent of GDP last year.

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