BTr plans P4-B add’l monthly offering for gov’t securities

The Bureau of Treasury (BTr) is planning to increase the volume of government securities to be auctioned off in the market by P4 billion starting next month.

National Treasurer Mina Figueroa said the decision was an offshoot of the increase in the yields of Treasury bills and Treasury bonds during the past months.

Figueroa said the June borrowing advisory will reflect a P2-billion increment in the volume offering each for T-bills and T-bonds, or a cumulative P4-billion increase for the month.

The BTr’s advisory also showed that the T-bill volume offering will be increased by P1 billion per auction. There will only be two scheduled auction next month, on June 7 and 21.

From only P10 billion per offering, the T-bill volume will go up to P11 billion, broken down into P4.5 billion for the bellwether 91-day tenor from the current level of P4 billion; and P3 billion for the one-year maturity, from the current P2 billion.

However, it was learned that the P3.5-billion volume offering for the 182-day papers will be retained.

It would be noted that the volume of T-bonds offered weekly went up as well by P500 million per offering, or a cumulative increase of P2 billion for the whole month of June.

By June 1, the government will sell 20-year T-bonds, four-year T-bonds the following week, five-years on the 15th of the month and finally, seven-year bonds on the 22nd, the last auction for the month.

A government securities dealer noted that the BTr’s decision to jack up the volume of debt papers to be offered in the market could have two-pronged effect.

"The increase in the volume offering could dry up the market. This, accordingly, could drive up interest rates," the dealer said.

This move could also lead to a "very low" maturity which is expected to put additional pressure on the level of money circulating in the financial system the dealer added.

By June, maturity is estimated to reach only P6.8 billion. "The upsize takes effect at a time when the maturity is very low," the dealer said.

The liquidity level currently floating in the system to purchase both T-bills and T-bonds is estimated at P55 billion.

Another dealer of a local bank, meanwhile, said the anticipated increase in the state-fund rate by the US Federal Open Market Committee (FOMC) sometime in June is another contributory factor that could push domestic interest rates up.

Market analysts projected the FOMC to tighten monetary policy by a minimum of 25 basis points to a maximum of 50 basis points. US state-fund rate currently stands at one percent, the lowest in 46 years.

According to another market player, the decision of fiscal managers to bring-up the level of domestic borrowings next month is an indication that the government cash position is falling short.

While there are assurances that the government will continue with its belt-tightening measures, the market is still wary about the sustainability of containing the budget deficit below program on a monthly basis.

Last Tuesday, authorities thwarted moves by the market to jack-up the rate of the seven-year T-bonds by rejecting some of the offers and partially accepted only P2.858 billion out of the P4 billion volume offering, at a rate-to-maturity of 11.775 percent from the 11.996 percent when it was last sold in April this year.