RATES OF government securities on offer this week will likely decline on strong demand following the central bank’s liquidity boost.

The Bureau of the Treasury (BTr) will attempt to raise P20 billion via Treasury bills (T-bills) on Monday, broken down into P5 billion each for 91- and 182-day papers and P10 billion for 364-day papers.

On Tuesday, the BTr will auction off P30 billion of reissued two-year Treasury bonds (T-bonds) with a remaining life of one year and nine months.

A bond trader said the T-bills may fetch yields 10-20 basis points (bps) lower than the previous auction, while rates for the two-year bonds could settle between 3.15% and 3.25%.

Meanwhile for another bond trader, rates for the T-bills may decline by 15-20 bps while that for the two-year T-bonds could fall within the 3.1-3.25% range.

At the secondary market on Friday, yields on the three-month and six-month T-bills stood at 3.079% and 3.163%, while the one-year and two-year papers were quoted at 3.295% and 3.308%, respectively.

Last week, the Treasury upsized the volume of T-bills it awarded to P24 billion from its initial P20-billion plan as bids reached P80 billion and yields declined across-the-board.

It also raised another P10 billion in short-term papers via its tap facility.

Broken down, the government raised P7 billion in 91-day papers, more than the initial P5-billion offer, at an average rate of 3.113%, down 35.8 bps from the 3.471% fetched in the April 13 auction.

It also upsized its award of 182-day papers to P7 billion from the P5-billion plan as total tenders reached P21.125 billion. The six-month papers yielded an average rate of 3.239%, lower by 17 bps from 3.409% previously.

For the 364-day papers, the BTr fully awarded P10 billion as planned out of total bids worth P25.864 billion. The average rates for the one-year securities dropped 39 bps to 3.295% from 3.685% previously.

Sought for comment, Robinsons Bank Corp. peso sovereign debt trader Kevin S. Palma said investors will continue to park their funds in government securities following the Bangko Sentral ng Pilipinas’ (BSP) moves to boost liquidity.

“Both of the offerings are expected to be well-received as financial market players continue to put liquidity to work now that the effect of the monetary easing made during this crisis is now in full throttle,” he said in a Viber message on Saturday.

Meanwhile, the first bond trader said demand for the short-term papers will continue to be robust as markets react to effects of relief measures rolled out by governments here and abroad.

The BSP Monetary Board delivered a 50-bp off-cycle cut to bring the key policy rate or the overnight reverse repurchase rate to 2.75%. Following this, rates for the overnight deposit and lending facility have also been trimmed to 3.25% and 2.25%, respectively.

These rates are the lowest on record and also since the BSP shifted to an interest rate corridor in 2016.

The cut came less than a month after the 50-bp reduction fired off last month and the 25-bp cut in February, taking the total policy rate cut delivered this year to 125 bps, completely unwinding the 175 bps in hikes done in 2018.

The BSP also slashed the reserve requirement of universal and commercial banks by 200 bps earlier this month, with analysts projecting another 200-bp cut soon to boost liquidity.

Governments around the globe have unveiled economic stimulus packages to cushion the blow of the coronavirus disease 2019 pandemic.

Back home, the government rolled out a P205-billion direct cash aid program for the 18 million poorest families and a P51-billion wage subsidy program for employees of small businesses, among others.

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

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