GOVERNMENT SECURITIES on offer this week will likely fetch higher rates as investors prefer to hold on to their cash amid the rising number of coronavirus disease 2019 (COVID-19) cases in the country and its potential impact on the economy.

The Bureau of the Treasury (BTr) will attempt to raise P20 billion via Treasury bills (T-bills) on Monday: P6 billion each for the 91- and 182-day T-bills and P8 billion via 364-day securities.

On Tuesday, the BTr will offer P30 billion worth of fresh seven-year Treasury bonds (T-bonds).

A bond trader said rates on the T-bills may rise 10 to 15 basis points against the previous auction’s yields, while rates for the seven-year bonds may settle around five percent.

“For [this] week, we expect the auction to fetch higher yields on weak demand due to concerns on the COVID-19 crisis, they (investors) prefer cash,” the bond trader said on Friday via telephone.

In the previous T-bill auction on March 16, the Treasury rejected all bids for the 91-day papers as the tenor was undersubscribed, attracting only P4.97 billion in bids versus the P6-billion program. Had the Treasury made a full award, the average rate for the three-month papers would have settled at 3.6%.

The government fully awarded the P6 billion it offered in 182-day T-bills and P8 billion in 364-day papers amid lower average yields of 3.398% and 3.557%, respectively

At the secondary market on Friday, the seven-year T-bond was quoted at 4.9%, while yields on the 91-, 182- and 364-day T-bills were at 3.199%, 3.422% and 3.721%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Another bond trader said one reason for investors’ preference for cash recently is that some might be “short of cash” amid fears over COVID-19 and as the month-long lockdown for Luzon continues to disrupt business operations.

National Treasury Rosalia V. de Leon assured that amid disruptions, slowing economic activity and the 30-day lockdown, the government has enough cash on hand after raising P310.8 billion from its sale of three-year retail Treasury bonds (RTBs) early last month as well as the series of full awards that the BTr made in previous auctions.

“It’s (lockdown) only one month. We have cash stashed from RTB and full award auctions. Hoarded cash already. We are so good in what we are supposed to do,” Ms. De Leon told reporters via Viber.

President Rodrigo R. Duterte placed Luzon under enhanced community quarantine until April 13 to slow the spread of COVID-19 that has infected 380 and killed 25 people in the country as of Sunday morning.

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