THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Monday as rates mostly continued to decline on investors’ continued flight to safe-haven assets.

The Bureau of the Treasury (BTr) raised P23.2 billion of T-bills yesterday, P3.2 billion bigger than its initial offer of P20 billion as the short-term papers attracted bids worth P60.4 billion.

Broken down, the BTr fully awarded P6 billion in 91-day T-bills out of total tenders worth P12.813 billion. The average rate for three-month papers moved sideways, inching up by one basis point (bp) to 3.013% from 3.003% fetched in the auction last week.

Another P6 billion was raised as planned via the 182-day papers with bids totaling P14.498 billion. The papers were awarded at an average rate of 3.324%, down by 4.1 bps from the previous week’s yield of 3.365%.

For the 364-day T-bills, the BTr upsized the award to P11.2 billion from the original P8-billion program as total tenders for the tenor reached P33.06 billion. The one-year securities fetched a lower average rate of 3.684% against the 3.787% quoted previously.

Prior to the auction, the 91-, 182- and 364-day T-bills fetched rates of 3.093%, 3.402% and 3.777%, respectively at the secondary market on Monday.

National Treasurer Rosalia V. de Leon said the lower rates for the T-bills were due to the rising concerns over the impact of the coronavirus disease 2019 (COVID-19) as well as hints of further monetary policy easing from the central bank.

“The narrative continues: because of the lingering adverse impact of the virus outbreak. And then of course we also have the assurance of the BSP (Bangko Sentral ng Pilipinas) Governor that the policy easing will continue to be able to support and stimulate the economy,” Ms. De Leon told reporters after the auction.

BSP Governor Benjamin E. Diokno said last week that another 25-bp rate cut is possible this year and that he will not “rule out” cuts worth 50-75 bps as the government seeks to cushion the economy from the adverse impact of the COVID-19 outbreak.

The Monetary Board on Feb. 6 trimmed key policy rates by 25 bps, bringing the rate on the BSP’s reverse repurchase, overnight deposit and lending facilities to 3.75%, 3.25% and 4.25%, respectively.

“All these also provided the push to the market in terms of the monetary stance continue to be very accommodating. And there’s still enough liquidity. Of course, everything is still on a wait and see mode also on the impact now that the effect of coronavirus continues to even expand now,” Ms. De Leon said.

Meanwhile, she said they decided to accept more than what was planned for the one-year papers to accommodate lower rates and strong demand, as the tenor was almost four times oversubscribed.

“Under our guidelines we can double it kasi (because) four times ’yung…ng non-competitive (bids) eh. So we accepted, basically because it is also lower than the current rates,” she said.

Sought for comment, a bond trader said the lower rates were within market expectations.

“For the lower rates, one is tracking the movement of global yields na (which are) lower because of generally risk-off sentiment due to the coronavirus,” the trader said via telephone.

Reuters reported that rising concerns on the COVID-19 outbreak drove rates on US government bonds to record lows.

The virus has killed more than 2,900 and infected over 85,000 people across the globe, with majority of which in China.

The World Health Organization recently placed the risk and impact of the new disease, which has yet to have an antidote or vaccine, at a “very high” global level

Today, the Treasury will offer P30 billion via five-year Treasury bonds (T-bonds) with a remaining life of four years and seven months.

“We still that market continues to be liquid and we also expect (lower) rates even for tomorrow’s auction would possible…than the secondary trading levels,” Ms. De Leon said.

She added that the BTr is still monitoring other markets for possible offshore issuances to see if there is still appetite since the virus outbreak has caused risk-off sentiment.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via T-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. — Beatrice M. Laforga with Reuters

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