NG cancels issuance of 1-yr T-bills for next week

Treasury officials announced yesterday that the National Government (NG) has decided to cancel the issuance of one-year Treasury bills (T-bills) next week, paring down its scheduled borrowing from P5 billion to P2 billion.

The Bureau of the Treasury (BTr) said it would proceed with the scheduled auction of the benchmark 91-day T-bills and the 182-day T-bills.

National Treasurer Omar Cruz said the BTr had been studying market preferences since the beginning of the year which clearly indicated that the T-bill market was largely being driven only by customer requirements.

"It’s a very illiquid market now and the people who are still there are those who need to fill up their clients’ requirements," Cruz said. "In view of the market’s limited appetite for longer-dated securities shown by limited tenders and trades, we are canceling the coming auction of 365-day notes."

Cruz said next week’s auction would involve only P1 billion of the benchmark 91-day T-bills and P2 billion of the 182-day notes that he said the market preferred.

"Hence the Treasury is only issuing P3 billion instead of the originally scheduled P5 billion on Monday," he said.

The average rate on the benchmark 91-day T-bill fell to a new all-time low last week, dropping to 2.86 percent against the previous record low of 2.88 percent.

After the results of the last auction, treasury officials said they might ultimately decide to scrap the one-year offers, at least for the rest of the quarter, and make up for the difference by adjusting the volume of the government’s bond issues.

Cruz said the government would rather issue more bonds where the market appetite was concentrated rather than continue issuing one-year notes that no one wanted.

Cruz said the demand for the short-end notes was spurred mainly by bank clients who needed 90-day money. The longer-end, however, attracted only throw-away bids.

"This market is now strictly dictated by client requirements," Cruz said. "If bank clients did not need these instruments, they wouldn’t bother with it at all because it is very illiquid."

According to Cruz, the one-year notes were too close to the shortest-tenor bonds which was significantly more liquid. "Considering there is no appetite for this tenor, the bids were clearly throw-way bids," he said.