THE GOVERNMENT made a full award of the Treasury bonds (T-bonds) it offered on Tuesday as yields sought by investors declined, with the Treasury also opening its tap facility to accommodate strong demand for the papers.

The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued 10-year T-bonds yesterday after the offer was more than twice oversubscribed, with total tenders amounting to P83.5 billion.

To accommodate the oversubscription, National Treasurer Rosalia V. de Leon said they offered another P15 billion of 10-year securities through the Treasury’s tap facility.

The average rate for 10-year papers dropped by 20 basis points (bps) to 4.409% yesterday from the 4.617% rate fetched in the previous auction of the tenor, which was on Nov. 12.

At the secondary market, the 10-year bonds were quoted at 4.391% on Tuesday, based on the Philippine Dealing System’s PHP Bloomberg Valuation Service Reference Rates.

Ms. De Leon said the lower rates and strong demand were mainly driven by continued concerns on the coronavirus disease 2019 (COVID-19) outbreak and the market’s anticipation of another policy rate cut following the central bank chief’s recent remarks.

“It is really more driven by the continuing concerns on the outbreak. And then of course, the anticipation of another rate cut coming from the pronouncement of the BSP (Bangko Sentral ng Pilipinas) Governor,” she told reporters after the auction yesterday.

“Liquidity remains even after our RTB (retail Treasury bonds) and auctions. Even when we siphoned some of the liquidity with the RTB, it will also be flowing back to the market given that it will be dispersed in the form of infrastructure, payments of account payables of agencies. Merong (there is) unwinding because it’s going back to the market,” Ms. De Leon said.

Robinsons Bank Corp. sovereign debt trader Kevin S. Palma also said “market liquidity remains robust across the curve amid strong demand for local bonds due to a possible BSP policy rate cut as soon as second quarter of the year.”

BSP Governor Benjamin E. Diokno said last week that the central bank may cut rates by another 25 bps as early as the second quarter to shield the economy from the effects of the COVID-19 outbreak and as it continues to dial back the 175 bps worth of hikes done in 2018.

The BSP’s policy-setting Monetary Board will have its second rate-setting meeting for the year on March 19. At its meeting on Feb. 6, it already reduced benchmark interest rates by 25 bps.

The rates on the BSP’s reverse repurchase, overnight lending and deposit facilities now stand at 3.75%, 4.25%, and 3.25%, respectively.

Last year, the central bank eased policy rates by a total of 75 bps amid slowing inflation.

Meanwhile, the government raised P310.8 billion from its offer of three-year RTBs earlier this month, broken down into P250 billion in new money and the remaining P60.8 billion from the RTB exchange offer program.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via Treasury bonds.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — B.M. Laforga

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