Treasury bills up as investors swarm auction

MANILA, Philippines – Investors swarmed the government’s Treasury bill (T-bill) auction yesterday, with total tenders reaching at least twice the offer size across all tenors as cash-rich investors remain hungry for lucrative investment facilities.

Despite the strong demand, rates for the 91, 182 and 364-day T-bills managed to rise slightly as investors sought higher premium for their money because of the government’s budget deficit woes.

The government’s budget gap hit P272.5 billion as of end-November 2009 and the full-year deficit is expected to hit just slightly below P300 billion. National Treasurer Roberto Tan said the “sideways” movement in the T-bill rates were within the government’s auction committee’s expectations.

The average rate of the 91-day T-bill rose to 3.914 percent from 3.887 percent previously or higher by 2.7 basis points. The highest offer amounted to 3.924 percent while the lowest bid was at 3.832 percent.

Investors tendered a total of P6.650 billion for this paper or more than three times the P2 billion offered by the auction committee.

For the 182-day T-bill, the government auction panel allowed the average rate to increase to 4.129 percent from 4.095 percent previously or an uptick of 3.4 basis points. The highest bid submitted by investors was 4.155 percent while the lowest was 4.065 percent.

The government’s auction committee awarded P3 billion out of total tenders amounting to P9.190 billion.

Similarly, the average rate of the 364-day security rose to 4.582 percent from 4.562 percent previously, also an increase of 2 basis points. For the one-year paper, the highest rate was 4.625 percent while the lowest rate was 4.560 percent.

Tan said the volumes were “very substantial” which gave the auction committee room to immediately accept the bids.

“The market is deploying their liquid holdings,” Tan told reporters after the auction.

Yesterday’s total sale of P8.5 billion worth of T-bills forms part of the government’s plan to borrow P110.5 billion in the first quarter of the year, 20 percent higher than the programmed debt sales in the same period last year.

According to the government’s borrowing program, it would sell P51 billion worth of T-bills and P59.5 billion worth of T-bonds during the first three months of the year.

The government borrows from the local market through the issuance of Treasury bills and bonds.

Fiscal authorities have said the government may have to increase borrowings this year to finance a wider budget gap.

Tan said foreign commercial borrowings this year may increase to $2.5 billion from a previous program of $2 billion while borrowings from multilateral lenders will still be at $1.8 billion. –Iris C. Gonzales (The Philippine Star)