BTr fully awards reissued bonds as high liquidity boosts demand

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday and even opened its tap facility as the tenor’s yield dropped amid strong liquidity in the market.

The Bureau of the Treasury (BTr) on Tuesday borrowed P30 billion as planned via the reissued 10-year bonds. The auction was more than thrice oversubscribed, with total bids reaching P98.67 billion.

The Treasury also opened its tap facility to raise another P20 billion via the bonds to accommodate the excess demand and take advantage of the low rates seen yesterday.

The reissued 10-year notes, which have a remaining life of four years and eight months, saw its average rate go down by 36.4 basis points (bps) to 2.536% from the 2.9% fetched in the Nov. 17 auction.

National Treasurer Rosalia V. de Leon said the bond auction was met with strong reception from the market, as seen in the oversubscription and the low rates fetched.

“Abundant liquidity coupled with cautious sentiment pulls sentiment to the belly of the curve,” Ms. De Leon told reporters via Viber after the auction on Tuesday.

A bond trader, meanwhile, said the average rate fetched for the reissued bonds was well within the market’s expectation of a 2.5-2.55% range.

“Basically, [investors are] deploying liquidity, [and] the yield pickup is nice. In general, the market is very liquid, awash with cash, so they need it to earn interest,” the trader said via Viber.

Financial markets have been awash with cash since last year as companies hold back on spending and expansion plans and prefer to park their excess funds in safe assets such as government securities amid an uncertain economic environment due to the pandemic.

Liquidity has also gotten a boost from the accommodative stance of the central bank, which last year slashed benchmark interest rates to record lows and also trimmed the reserve requirement ratio of banks.

The BTr plans to borrow P140 billion from the local debt market this month: P80 billion via weekly auctions of Treasury bills and P60 billion from fortnightly T-bond offerings.

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