THE GOVERNMENT fully awarded the reissued 10-year Treasury bonds (T-bonds) it offered on Tuesday, even opening the tap facility to raise P10 billion more, as investors awash with cash look for higher yields.

The Bureau of the Treasury (BTr) has borrowed P30 billion as planned via the reissued 10-year T-bonds. Tenders reached P54.725 billion or nearly twice as much as the initial offer.

The bonds fetched an average rate of 2.724%, down 3.5 basis points (bps) from the 2.759% logged in the previous auction on July 7.

The BTr also offered another P10 billion via the tap facility yesterday to take advantage of the strong demand and low rates.

National Treasurer Rosalia V. de Leon said robust liquidity in the market continued to drive yields lower, continuing the trend seen in its auctions in the past four months.

“(The market is in) very deep liquidity and (the investors’) search for high yields drive duration interest,” Ms. De Leon told reporters via Viber.

A bond trader shared the same view, saying by phone that the auction was “oversubscribed due to the excess liquidity in the market (since) the market continued to be awash with cash despite the inflation data… and considering the record high booked dun sa (for the) RTB-24.”

Inflation picked up to 2.7% in July from 2.5% in June and the 2.4% rate a year ago, largely due to higher transportation costs and faster increases in prices of other goods and services such as alcoholic beverages and tobacco, housing, water, electricity and fuel.

Meanwhile, the BTr raised a record P516.3 billion in five-year retail Treasury bonds (RTBs) last week at a coupon of 2.625% per annum. The debt papers will be issued on Wednesday, Aug. 12.

The measures rolled out by the central bank to spur the economy also contributed to the liquidity boost in the market, the trader added, such as the reduction in banks’ reserve requirement ratios (RRR) and purchases of bonds from the government and the secondary market.

The Bangko Sentral ng Pilipinas (BSP) has cut benchmark interest rates by 175 bps so far this year. Rates on its overnight reverse repurchase, lending and deposit facilities are now at record lows of 2.25%, 2.75 and 1.75%, respectively.

The BSP also cut the RRR of thrift and rural banks by 100 bps last month to three percent and two percent, respectively, while the reserve ratio of universal and commercial banks was slashed by 200 bps in April to 12%.

The central bank has likewise been buying debt papers at the secondary market and from the government. It bought P300 billion in three-month government securities from the Treasury in March under a repurchase agreement.

The government has set a P170-billion borrowing program for August. It will offer P110 billion in Treasury bills weekly and P60 billion in T-bonds to be auctioned off fortnightly.

It borrows from local and foreign lenders to plug its budget deficit seen to hit 9.6% of GDP this year. This year, it plans to borrow around P3 trillion. — B.M. Laforga

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