Bids for 1-year IOUs dumped as market positioned for BSP issuance

The Bureau of the Treasury on Monday rejected bids for the P10-billion worth 364-day T-bills as the market sought higher yields in anticipation of the Bangko Sentral ng Pilipinas’ (BSP) first-ever debt paper.

National Treasurer Rosalia V. de Leon said the annual rate for the one-year IOUs would have jumped by 16.2 basis points to 1.969 percent from 1.807 percent last week had the Treasury fully awarded the securities.

“Banks were positioning in anticipation of the maiden BSP offering as well as the outcome of the US Federal Reserve’s policy meeting this week,” De Leon said.

Liquidity

The BSP will offer a total of P20 billion of 28-day securities on Friday as it moves to “more market-based monetary operations” while managing liquidity.

Asked why investors shunned the longest T-bill tenor, De Leon said “banks were saying that they will go for one-year if the Treasury accepted a big pickup against secondary levels.”

Last week, De Leon said the Treasury was closely coordinating with the BSP on their respective issuances, especially the segments of the curve where they would be selling.

De Leon believed investors won’t be overwhelmed despite more government securities on offer. She noted the BSP’s weekly term deposit facility auction even remained oversubscribed these past years.

Oversubscribed

The Treasury nonetheless raised a total of P12 billion from Monday’s auction, as the award for the benchmark 91-day was upsized to P7 billion from the original P5-billion offering.

The average rate for the three-month debt paper declined to 1.15 percent from 1.167 percent previously.

The Treasury also sold P5 billion in 182-day T-bills even as the rate inched up to 1.589 percent from 1.518 percent last week.

Across the three T-bill tenors, tenders totaled P54.1 billion, making the auction over 2.7 times oversubscribed.

Meanwhile, De Leon said that even as the Bayanihan to Recover as One Law signed by President Duterte last week raised the BSP’s lending ceiling for COVID-19 response, the new stimulus spending package in itself was “adequately covered by debt service savings and additional income.”

“We proposed the higher cap to enable the national government to avail of the BSP facility to fund the requirements against COVID-19 and pursue quick economic recovery,” De Leon said. INQ