THE GOVERNMENT made a full award of the reissued seven-year Treasury bonds (T-bonds) it auctioned off on Tuesday amid lower rates and strong demand as investors eye longer tenors as they seek higher yields.

The Bureau of the Treasury (BTr) yesterday raised P30 billion as planned via the reissued seven-year T-bonds as the offer was more than three times oversubscribed, with total bids hitting P99.109 billion.

The BTr also opened its tap facility to offer another P15 billion via the same tenor.

The average rate for the seven-year papers plummeted by 178.6 basis points to 2.946% yesterday from the 4.732% seen when the tenor was last awarded on Jan. 21.

National Treasurer Rosalia V. de Leon said the auction was met with strong demand as investors started eyeing longer tenors for higher yields.

“Search for yields so appetite now stretched to longer than one year with low inflation,” Ms. De Leon told reporters in a Viber message on Tuesday.

Government data showed headline inflation eased to 2.2% in April from 2.5% in March and the three percent seen in April 2019.

This brought the year-to-date average to 2.6%, well within the central bank’s 2-4% target and higher than the revised 2% forecast for this year.

Easing inflation was largely attributed to falling oil prices in the global market that drove down domestic pump prices and transport costs, which offset the uptick in food prices.

Ms. De Leon added that liquidity in the market remains strong as investors continue to flock to safe-haven assets given uncertainties here and overseas.

Robinsons Bank Corp. peso debt trader Kevin S. Palma said “despite all the uncertainties surrounding the global health pandemic, [there have been] improved liquidity conditions onshore due to recent monetary adjustments by the BSP (Bangko Sentral ng Pilipinas) continued to fuel demand for both the GS (government securities) primary and secondary markets.”

The BSP Monetary Board has delivered a total of 125 bps in reductions to benchmark rates so far this year to help cushion the blow of coronavirus disease 2019 pandemic on the economy.

The latest reduction was a 50-bp off-cycle cut on April 16 which followed the 50-bp cut in March and the 25-bp cut in February.

This brought key policy rates to record lows of 2.75% for the overnight reverse repurchase facility and 3.25% and 2.25% for the overnight lending and deposit facilities, respectively.

Meanwhile, the BTr made accepted P4 billion in bids for one-year papers via the tap facility on Monday, out of the programmed P10 billion.

This was on top of the P22 billion it raised earlier that day from the auction of Treasury bills (T-bills).

The government is planning to borrow P170 billion from the local market this month: P110 billion via its weekly T-bill auctions and the remaining P60 billion via T-bonds to be offered fortnightly.

The state borrows to plug its budget deficit expected to hit P1 trillion this year or equivalent to 5.3% of gross domestic product. — Beatrice M. Laforga

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