THE GOVERNMENT fully awarded the Treasury bills (T-bills) it auctioned off on Monday even as rates inched up after the central bank’s decision to halt monetary easing and amid hopes of a “flattening” in the country’s coronavirus curve.

The Bureau of the Treasury (BTr) borrowed P20 billion via T-bills as planned out of P50.277 billion in bids, or more than twice the offered amount.

Broken down, the BTr made a full P5-billion award of the 91-day debt papers offered from P12.178 billion in tenders. The three-month papers fetched an average rate of 1.131%, up 1.3 basis points (bps) from the 1.118% logged in the previous auction last week.

It also raised P5 billion as planned via the 182-day T-bills out of total bids worth P11.661 billion. The average yield of the six-month papers inched up 1.9 bps to 1.407% from 1.388% previously.

For the 364-day securities, the Treasury raised the programmed P10 billion out of P26.438 billion in bids. The one-year instruments yielded an average rate of 1.751%, up by 0.6 bp from the previous rate of 1.745%.

National Treasurer Rosalia V. de Leon said after the auction that the results were as expected after the central bank kept its policy rates unchanged last week.

The policy-setting Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday kept benchmark interest rates steady amid a benign inflation outlook and signs of economic recovery. Rates on the BSP’s overnight reverse repurchase, lending and deposit facilities are currently at record lows of 2.25%, 2.75% and 1.75%, respectively.

Ms. De Leon said they expect the rates of the government securities to move “sideways or tad higher” moving forward.

With the recent upticks in rates, a bond trader said it is “hard to think that rates will stay this low,” particularly for the shorter tenors as the market sees faster inflation next year and with hopes of a rebound after the University of the Philippines (UP) said it forecasts a possible “flattening” of the coronavirus infection curve by September.

“Hard to reconcile with higher inflation expectations for next year and recent comments from UP that the curve may flatten by next month,” the trader said via Viber.

The central bank aims to keep inflation within 2-4% this year and in 2021. The BSP last week raised its inflation forecast for this year to 2.6% from the 2.3% given in the June policy review. The 2021 and 2022 forecasts were likewise hiked to 3% (from 2.6%) and 3.1% (from 3%), respectively.

Guido David, a research fellow at the UP-OCTA, said in a radio interview on Monday there is still a chance that the curve will be flattened by the end of the month or next month as the reproduction rate of the disease — or the number of individuals that a virus carrier can infect — slows.

He said the rate slowed after a stricter lockdown was reimposed in Metro Manila and its nearby areas. However, he stressed the need to sustain containment efforts to avoid a resurgence of cases.

On Tuesday, the BTr will offer P30 billion in reissued 20-year Treasury bonds (T-bonds) that have a remaining life of 12 years and seven months and a coupon rate of 3.635%.

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

It plans to borrow around P3 trillion this year from local and foreign lenders to plug its budget deficit seen to hit 9.6% of gross domestic product. — Beatrice M. Laforga

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