Gov’t fully awards bonds, opens tap facility on strong demand

THE GOVERNMENT made a full award of the Treasury bonds (T-bonds) it offered on Tuesday and even opened its tap facility following huge demand from investors amid the continued concerns on the coronavirus disease 2019 (COVID-19) outbreak.

The Bureau of the Treasury (BTr) raised P30 billion as planned via the five-year T-bonds yesterday and opened the tap facility for another P10-billion offer as the auction was nearly three times oversubscribed, with total tenders reaching P83.511 billion.

The average rate for the papers dropped 20.9 basis points (bp) to 4.018% from the 4.227% fetched during the maiden issuance on Oct. 16.

At the secondary market on Tuesday, the five-year bonds were quoted at 4.094%, based on the PHP Bloomberg Valuation Service Reference Rates.

Deputy Treasurer Erwin D. Sta. Ana said the lower yields were largely driven by ongoing risk-off sentiment among investors due to the COVID-19 outbreak as well as hints of monetary easing at home and abroad meant to help cushion countries from the economic impact of the virus.

“[Investors flew] to safety because of risk-off sentiment and everybody wants to park their funds in safe assets and those are government papers. That’s why you can also see the US Treasuries declining, all other major markets’ government bonds are also going down,” Mr. Sta. Ana told reporters after the auction.

Socioeconomic Planning Secretary Ernesto M. Pernia said on Monday the country could see as much as a one-percentage point reduction in gross domestic product (GDP) growth this year if the outbreak persists until the end of the year.

The assessment was made based on a scenario where inbound Chinese tourists will be cut by 100% and foreign tourist arrivals will be reduced by 10%, while trade will be “drastically reduced.”

The Philippine government is targeting 6.5-7.5% GDP growth this year.

The virus has killed more than 3,000 people and infected over 90,000 across the globe, with majority of cases recorded in China.

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

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

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

Meanwhile, US Federal Reserve Chairman Jerome Powell earlier said the US central bank will “act as appropriate” to support the economy amid the challenges that the outbreak pose, according to Reuters.

Mr. Powell said they continue to monitor the events and their impact on the economy but assured that the “fundamentals of the US economy remain strong.”

Sought for comment, a bond trader said the result was expected since the auction was met with “good reception as expected as market searches for yield [and] safe haven.”

OFFSHORE BONDS
Meanwhile, Mr. Sta. Ana yesterday said the Treasury continues to monitor bond markets abroad for possible offshore issuances, which were initially planned to be done within the first half of the year.

“[That’s] the reason why we are trying to maximize the funding that we can derive out of the local market so we are not too pressured to actually raise funds offshore, given the bias for local funding. That opportunity (offshore) is always there but of course, in times like this, it’s kind of difficult to push…and issue offshore given the conditions,” the official said.

The BTr has set a P420-billion local borrowing program this quarter, broken down into P240 billion in Treasury 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. — B.M. Laforga