MANILA -- The rates of Philippine 92-day and 183-day Treasury bills (T-bills) declined Monday as the Bureau of the Treasury’s (BTr) auction committee made full awards for these tenors while making only a partial award for the one-year paper.
Average rate of the bellwether three-month paper, which is a day higher than the regular 91-day paper because of adjustment since May 1 is a holiday, declined to 5.563 percent from 5.608 percent during the auction last April 22.
BTr offered this tenor for PHP4 billion and banks submitted PHP9.858 billion worth of tenders.
Relatively, rate of the 183-day paper slipped to 5.978 percent from 5.996 percent in the previous week.
Banks submitted PHP10.947 billion worth of bids, more than twice the PHP5 billion offer.
On the other hand, the auction committee awarded PHP4.01 billion worth of the 365-day T-bills, lower than the PHP6-billion offer after banks asked for high yield.
Its average rate stood at 6.085 percent, higher than the 5.561 percent in the secondary market in Monday’s morning session, and the 6.052 percent that the securities fetched during the auction last April 8. This tenor was not awarded during the past two weeks’ auction.
“The committee just decided to keep the rates at secondary market levels so we decided that for the one year we have to keep it at the current market levels,” Deputy Treasurer Erwin Sta. Ana told journalists after the auction.
Sta. Ana attributed the demand for higher rates to “cost of funds for some banks.”
“I think there’s a little bit tightness in liquidity that is actually reported although we think that given the turnout of the auction there is still ample liquidity because of the two times bid to cover ratio,” he said.
Meanwhile, Sta. Ana said the Philippine government’s decision to tap the European market in its next debt issuance has been a plan “for the longest time.”
He explained that this exercise is “part of the DOF (Department of Finance) and Treasury's strategy to diversify its financing instruments and diversifying investor base.”
“So it has been a work in progress for quite some time and we felt that given market conditions it is opportunistic for us to go back to the euro market,” he stressed.
The Philippine government recently appointed Deutsche Bank and UBS as joint global coordinators for the planned debt issuance and these two will be joined by BNP Paribas, Credit Suisse and Standard Chartered as bookrunners.
BTr officials remain mum on the volume to be issued except that it will be the benchmark or about USD500 million.
Sta. Ana declined to specify when they will issue the Euro bond but noted that “we actually just put ourselves in a position where we can issue, meaning we make the necessary preparations, get the necessary approvals so that when the opportunity comes, we will trigger a transaction.”
Some Philippine finance and monetary officials are currently on a deal roadshow in Europe namely in Zurich, Switzerland; London, UK; Paris, France; Frankfurt, Germany and Milan, Italy for this planned issuance and Sta. Ana said “next week we will decide when to price.”
Asked on the impact of recent pronouncements by Federal Reserve officials regarding their stance to be patient with any rate hike this year, Sta. Ana said they have considered this.
“Actually of course we talk about the Fed reportedly not raising interest rate anytime soon so that has an effect on rates globally and we feel that it’s something that we can actually handle with respect to the pricing in the euro market current levels,” he added.
Relatively, Sta. Ana said they are still awaiting the approval by China’s National Association of Financial Market Institutional Investors (NAFMII) for the planned renminbi-denominated Panda bond issuance.
Asked which of these two securities will be issued first he said this will depend on the result of the Euro bond road show.
“I cannot say for sure but assuming we get the NAFMII go ahead this week, you know we will just play it by ear and just decide which one to go first,” he added.
Philippines issued its maiden three-year Panda bond, a debt paper issued by a non-Chinese issuer in China, amounting to 1.46 million renminbi in March 2018.
Philippine finance officials said they target to issue higher amount and more tenors this year. (PNA)
