Liquid banks make a beeline for short-term IOUs

The Bureau of the Treasury fully awarded the P20 billion in T-bills it offered Tuesday on the back of strong demand for debt paper with shorter tenor.

Citing “healthy market appetite,” the Treasury sold P9 billion in 91-day IOUs at 2.233 percent; P6 billion in 182-day at 2.519 percent; and P5 billion in 364-day at 2.849 percent.

“Auction results revealed strong demand for the T-bills as average rates trended downward from the previous auction except for the 91-day primarily due to base effects,” the Treasury said in a statement.

Tenders for the three tenors totaled P50.1 billion, making the auction over 2.5 times oversubscribed.

“Basically, we see the yields coming down given the very strong appetite coming out of the market for short tenor,” National Treasurer Rosalia V. de Leon told reporters after the auction.

“There are still a lot of moving parts like the [looming] US Fed [rate hikes], and then there are also some speculations that the Bangko Sentral ng Pilipinas will tighten by about two to three hikes. At the same time, there’s much liquidity because the BSP removed the 28-day term deposit facility—there’s just a P40-billion offering in the TDF [with seven-day tenor], so there’s really a huge appetite for short tenor maturities. They have to park it in something with shorter tenor,” de Leon said.

Last week, the Treasury rejected bids for the P20 billion in new 10-year T-bonds offered at the first auction of 2018 as the debt paper fetched higher rates. Bids for the treasury bonds amounted to P18.7 billion only.

According to de Leon, the appetite for T-bonds may have turned tepid due to the tenor and expectations of higher interest rates here and abroad. —BEN O. DE VERA