Gov’t makes full award of T-bills as rates decline

THE GOVERNMENT made a full award of the Treasury bills (T-bills) auctioned off on Monday as rates slipped across-the- board amid strong demand.

The Bureau of the Treasury (BTr) on Monday borrowed P20 billion as planned via the T-bills, with total bids reaching P64.398 billion or more than three times as much as the offer.

It also opened the tap facility to offer another P5 billion in one-year securities to accommodate the excess demand and raise more funds at low rates.

The BTr raised P5 billion as planned via the 91-day debt papers out of tenders worth P21.791 billion. The three-month papers fetched an average rate of 1.335%, 11.9 basis points (bps) lower than the 1.454% logged in the auction last week.

It also made a full P5-billion award of 182-day T-bills out of P16.65 billion in bids. The average rate of the six-month papers slipped by 2 bps to 1.605% from 1.625% previously.

For the 364-day securities, the BTr borrowed the programmed P10 billion from P25.957 billion in tenders at an average rate of 1.758%, down 1.2 bps from the 1.77% previously.

T-bill rates dropped on strong demand as market participants awaited the fifth State of the Nation Address (SONA) of President Rodrigo R. Duterte set on Monday afternoon, National Treasurer Rosalia V. de Leon told reporters via Viber after the auction.

Ms. De Leon said investors were awaiting details on government plans to address the coronavirus outbreak in the country, as well as its economic recovery plan.

Several business groups and government officials expected Mr. Duterte to discuss the government’s economic recovery plan, with this year’s gross domestic product (GDP) seen to contract after more than two decades of growth and with millions of Filipinos here and abroad without jobs.

The strong demand for T-bills was due to robust liquidity in the market, said Kevin Palma, peso sovereign debt trader at Robinsons Bank Corp.

“Investors continue to flock short-term debt papers amid the persistent high liquidity in the financial system. Echoing [Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E.] Diokno’s remarks, the BSP noted that some banks may have lowered their risk tolerance and tightened loan standards,” Mr. Palma said via Viber on Monday.

The BSP has rolled out easing measures to boost liquidity in the market as the coronavirus pandemic continues.

Last week, the central bank slashed the RRR of smaller banks by one percentage point to three percent for thrift banks and two percent for rural and cooperative lenders. The reduction will take effect on Friday, July 31, and is expected to release some P10 billion into the financial system.

The BSP in April reduced the RRR of universal and commercial banks by two percentage points to 12%.

It has also slashed benchmark interest rates by 175 bps this year to help boost economic activity.

“With those factors at play, some market players may have opted to park their funds and seek safety with government securities for the meantime,” Mr. Palma added.

The BTr has raised P165.5 billion via government securities this month as of Monday: P135.5 billion in T-bills and P30 billion in Treasury bonds (T-bonds).

The government has set a P205-billion borrowing program for July: P145 billion in T-bills via weekly auctions and P60 billion in T-bonds auctioned off fortnightly.

The BTr canceled the auction for 35-day papers scheduled on Tuesday to give way to the ongoing offer of five-year retail Treasury bonds (RTBs), which is now in its second week.

The Treasury has canceled three scheduled auctions to give way to the public offer of RTBs set to run until Aug. 7.

Ms. De Leon has said the amount raised so far has already breached the record P310 billion in three-year retail bonds sold in February.

The government borrows from local and foreign lenders to plug its budget deficit seen to hit 8.4-9% of gross domestic product this year. — B.M. Laforga