THE GOVERNMENT fully awarded the Treasury bills (T-bills) it offered on Monday as rates dipped amid lower inflation expectations.

The Bureau of the Treasury (BTr) raised P25 billion as planned via the T-bills on Monday, with total tenders reaching P83.705 billion, making the offer over three times oversubscribed. However, demand declined from the P97 billion in bids seen last week.

Broken down, the Treasury awarded the programmed P5 billion in 91-day T-bills as total bids reached P16.965 billion. The three-month papers fetched an average rate of 1.27%, a tad lower than the 1.278% logged in last week’s auction.

The BTr also borrowed P8 billion as planned via the 182-day debt papers after the tenor attracted P25.11 billion in tenders. The average rate of the six-month debt dipped to 1.54% from 1.549% previously.

Lastly, the government made a full P12-billion award of the 364-day instruments as demand reached P41.63 billion. The one-year T-bills were quoted at 1.81%, down by 1.9 basis points (bps) from last week’s rate of 1.829%.

The Treasury opened its tap facility to offer another P5 billion in 364-day papers to take advantage of the strong appetite for the tenor that caused its yield to drop.

At the secondary market, before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 1.304%, 1.5447%, and 1.8504% respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

“[The auction saw] strong participation as rates marginally declined,” National Treasurer Rosalia V. de Leon told reporters in a Viber message after Monday’s auction.

Ms. De Leon attributed the decline in T-bill yields to investors’ preference for safe haven assets like government securities and central bank’s lower inflation forecast for 2021.

Meanwhile, a bond trader said by phone that the auction’s outcome was expected following the worse-than-expected drop in first-quarter gross domestic product (GDP) and the Bangko Sentral ng Pilipinas’ (BSP) decision to keep its accommodative stance to support the economy.

The BSP held its key interest rate at a record low for a fourth straight meeting on Wednesday as it continues to support the economy’s recovery from the pandemic.

The Monetary Board maintained the overnight reverse repurchase rate at its record low of low of 2%. Both the lending and deposit rates were also kept at 2.5% and 1.5%, respectively.

The central bank’s decision to keep rates steady came a day after release of disappointing first-quarter GDP data. For the first three months of 2021, economic output shrank by an annual 4.2%, keeping the economy in recession for a fifth consecutive quarter.

Meanwhile, at the same meeting, the BSP lowered its inflation outlook for this year to 3.9% from its previous estimate of 4.2%. This will put inflation back within the central bank’s 2-4% annual target. On the other hand, the 2022 forecast was raised to 3% from 2.8% previously.

On Tuesday, the BTr will auction off P35 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of six years and 11 months.

The Treasury wants to raise P170 billion from the local bond market this month: P100 billion via weekly offerings of T-bills and P70 billion from T-bonds to be auctioned off fortnightly.

The government is looking to borrow P3 trillion this year from domestic and external sources to help fund its budget deficit seen to hit 8.9% of gross domestic product. — B.M. Laforga