THE GOVERNMENT fully awarded the reissued five-year Treasury bonds (T-bonds) it offered on Wednesday on the back of low rates and strong demand as investors continue their flight to safer assets.

The Bureau of the Treasury (BTr) raised P30 billion in reissued five-year T-bonds yesterday out of total tenders worth P118.422 billion, or nearly four times the initial offer.

The average rate for the five-year notes dropped 134.2 basis points (bps) to 2.676% from the 4.018% fetched in the March 3 auction.

National Treasurer Rosalia V. de Leon told reporters via Viber that they opened the tap facility to raise another P20 billion via the long-term papers to accommodate excess demand.

A bond trader said the huge demand indicates that investors are “hunting for yields” on long-term papers as they continue their flight to safe-haven assets like government bonds.

The trader said there is also abundant liquidity in the market as “no one’s borrowing for expansion of business” while weak demand and uncertainties persist amid the ongoing coronavirus pandemic.

The trader said investors likely also priced in the growth outlook for this year and beyond which has been substantially affected by the economic fallout from the public health emergency.

The government’s economic team is projecting gross domestic product (GDP) to contract by 2-3.4% this year before bouncing back to 7.1-8.1% in 2021 due to a low base, and to 7-8% in 2022.

GDP contracted by 0.2% in the first quarter, recording its first decline in two decades or since 1998.

Excluding the results of the tap facility on Wednesday, the BTr has raised a P226.3 billion from a mix of Treasury bills (T-bills) and T-bonds in May.

The total borrowings exceeded the P170-billion program set for this month as the Treasury opened its tap facility after each auction, even upsizing the awarded volume for some offerings due to strong demand.

For June, the government is planning to borrow P170 billion from the local market, broken down into P110 billion via its weekly T-bill auctions and P60 billion via T-bonds to be offered fortnightly. — B.M. Laforga