THE GOVERNMENT made a full award of the reissued three-year Treasury bonds (T-bonds) it auctioned off on Tuesday as demand soared amid strong liquidity in the market, further pulling down rates.

The Bureau of the Treasury (BTr) borrowed P30 billion as planned via the reissued three-year T-bonds yesterday. The bonds have a remaining life of two years and 10 months.

Total bids for the auction spiked to P124.201 billion, making the offer more than four times oversubscribed.

This prompted the BTr to open the tap facility to offer another P20 billion to accommodate excess demand.

The three-year papers fetched an average rate of 2.558%, down by 38.8 basis points (bps) from 2.946% seen during the May 12 offering and also lower than the 2.579% rate at the secondary market on Monday before the auction.

National Treasurer Rosalia V. de Leon said the auction was met with strong demand, with the market still “flushed” with liquidity and the bonds still offering positive rates amid easing inflation.

“Market (is) flushed with liquidity and (participants can) earn real positive rates given benign inflation,” Ms. De Leon told reporters via Viber.

Headline inflation rate slowed to 2.1% in May, easing to a six-month low, from the 2.2% print in April and 3.2% in the same month last year.

This brought the year-to-date average to 2.5% in the first five months of the year, well within the central bank’s 2-4% target for this year.

For Kevin Palma, peso sovereign debt trader of Robinsons Bank Corp., investor optimism as the economy slowly reopens boosted appetite for government bonds.

“High liquidity in the financial system coupled with positive sentiment from the economy’s gradual opening continued to drive buying demand in government securities,” Mr. Palma said.

Metro Manila and other major cities in the country transitioned to relaxed lockdown measures on June 1 after over two months under strict quarantine.

The government plans to borrow P170 billion from the local market in June: P110 billion via weekly Treasury bill auctions and the remaining P60 billion in T-bonds to be offered fortnightly. — B.M. Laforga