Gov’t scraps 35-day T-bills from September auctions

The Bureau of the Treasury has scrapped 35-day bills from its lineup of auction offerings in September at a time when rates of government securities were on the rise amid a pause in monetary easing.

In an Aug. 27 memorandum to all government securities eligible dealers, National Treasurer Rosalia V. de Leon said the Treasury would offer P20 billion in bills—P5 billion each in the benchmark 91- and 182-day and P10 billion in 364-day—on Sept. 1, 7, 14, 21 and 28.

The Treasury will also sell P30 billion each in three- and 10-year bonds on Sept. 8 and 22, respectively.

As such, the Treasury programmed to issue a total of P160 billion in debt paper next month, lower than the P170 billion in August.

Missing from the September domestic borrowings program were the 35-day bills, which had been auctioned since late March at the start of the COVID-19 lockdown.

Prior to its comeback in March, the shortest T-bill tenor was last offered in 2004.

Toward the end of August, yields of treasury bills and bonds were on an upward trend after the Bangko Sentral ng Pilipinas paused from monetary easing even as the market deemed key interest rates could still go lower amid an economic recession.

In a report, the regional macroeconomic surveillance organization Asean+3 Macroeconomic and Research Office (Amro) said the recent higher bid rates such as those fetched by the reissued 20-year bonds last Tuesday that resulted in rejection of all tenders “were driven by technical factors specific to the bond and should not raise much concern over the general appetite for Philippine government bonds.”

“The rejection of bids by [the Treasury] is a positive sign in that it shows that the government is not under immediate pressure to raise funds and is willing to wait for appropriate yield levels to issue bonds. However, a risk worth flagging is the widening fiscal deficit and a sizable issuance plan for 2021. Bond yields may rise as investors position themselves ahead of the increase in supply,” Amro said in its Aug. 27 report titled “Philippine Bonds: The Auction ‘Glitch.’”

The budget deficit had been programmed to balloon to 9.6 percent of gross domestic product this year and 8.5 percent next year from 3.4 percent last year as the government needed to spend more to fight the health and socioeconomic crises inflicted by COVID-19.