THE GOVERNMENT fully awarded the Treasury bills (T-bills) it auctioned off on Monday as rates mostly declined amid strong liquidity and expectations of a policy rate cut, even opening the tap facility to raise another P10 billion to accommodate strong demand.

The Bureau of the Treasury (BTr) raised P20 billion as planned via T-bills yesterday as the offer was more than twice oversubscribed, with total tenders reaching P50.6 billion.

National Treasurer Rosalia V. de Leon said the BTr also opened its tap facility to offer P5 billion each in 182- and 364-day papers to accommodate strong demand at low rates.

Broken down, the government raised P10 billion worth of 91-day T-bills as planned out of total bids of P15.48 billion. The three-month papers fetched an average rate of 3.471%, up 5.8 basis points (bps) from the 3.413% seen in the auction last week.

The Treasury also made a full award of its P5-billion offer of 182-day papers as the tenor attracted bids worth P16.193 billion. The average rate for six-month papers stood at 3.409%, 14.4 bps lower compared to the 3.553% fetched previously.

For the 364-day T-bills, it likewise accepted P5 billion as programmed out of P18.976 billion in bids at an average rate of 3.685%, down 16 bps from the previous rate of 3.845%.

Ms. De Leon told reporters that the government made a full award after the rates of the six-month and one-year papers declined and as the higher yield on the three-month T-bills was still within the acceptable range.

“Made full award as rates for both 182 and 364 declined. Also full award for 91-day since still within acceptable range. [We saw] strong liquidity onshore with maturity of P120 billion today and in anticipation of another RRR (reserve requirement ratio) cut as announced by Governor Diokno,” she said via Viber.

Ms. De Leon said investors priced in the possibility of another rate cut as hinted on by Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno on Sunday.

A bond trader shared the same sentiment, saying the auction results were “quite expected given yesterday’s statement of Governor Diokno.”

The trader added that investors preferred to put their money in the 182- and 364-day T-bills to preserve these rates in anticipation of the BSP’s monetary easing.

“Because, if you invest in 91 days, there is what you call reinvestment risk. If nag-cut si BSP (If the BSP cuts rates) within that time frame, you will have to reinvest at a much lower rate, so you are locking it na sa (in the) six months and one year to preserve the rate,” the trader said via Viber.

Mr. Diokno on Sunday signaled a “deeper cut” in benchmark interest rates to support the economy amid an expected slowdown due to the coronavirus disease 2019 (COVID-19) pandemic.

The policy-setting Monetary Board has cut rates by a total of 150 bps since 2019, almost completely unwinding the 175 bps in hikes it implemented in 2018 amid multi-year high inflation.

Its latest move was a 50-bp reduction on March 19, which brought the overnight reverse repurchase rate to 3.25% and overnight lending and deposit rates to 3.75% and 2.75%, respectively, in a bid to shield the economy from the virus fallout.

The Monetary Board will meet to discuss policy anew on May 21.

While noting that monetary policy works with a lag and that they will remain “data dependent,” Mr. Diokno said governments worldwide need to ensure a “soft landing” for their economies in the aftermath of the pandemic.

The Treasury has set a P190-billion local borrowing program for April, broken down into P130 billion in T-bills and P60 billion in Treasury bonds. — Beatrice M. Laforga

RELATED ARTICLESMORE FROM AUTHOR