THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Monday and opened the tap facility again as strong demand persisted, causing yields to move sideways.

The Bureau of the Treasury (BTr) borrowed P22 billion via the T-bills on Monday after accepting more bids for the six-month debt from the non-competitive sector. The offering was more than four times oversubscribed as bids reached P87.11 billion.

Broken down, the Treasury raised P5 billion as planned via the 91-day debt papers from P17.76 billion in tenders. The three-month T-bills fetched an average rate of 0.984%, inching up by 0.7 basis point (bp) from the 0.977% seen in last week’s auction but still below the 1% level.

Meanwhile, it borrowed P7 billion via the 182-day T-bills, higher than the P5-billion program, as total bids hit P24.296 billion. The six-month papers were quoted at an average rate of 1.348%, down 1.2 bps from 1.36% previously.

For the 364-day securities, the Treasury accepted P10 billion as planned from tenders worth P45.055 billion. The average rate of the one-year instruments also went down by 2.3 bps to 1.582% from the previous week’s 1.605%.

It also opened the tap facility to offer another P10 billion in one-year papers.

“Liquidity remains strong particularly on the front end, with assuring statements from Governor Diokno to continue supportive policies for economic rebound as well as Fed’s Powell message to keep rates low,” National Treasurer Rosalia V. de Leon told reporters via Viber after the auction on Monday.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said during a BusinessWorld One-on-One online interview last week that the central bank will keep interest rates low to support the economy’s recovery amid the coronavirus pandemic.

Mr. Diokno said benchmark rates will likely remain at their current record lows until the economy returns to its pre-pandemic growth trend of 6.5-7.5%. He added the BSP can also reduce banks’ reserve requirements further to help boost lending.

The BSP slashed rates by a total of 200 bps last year to bring overnight reverse repurchase, lending, and deposit rates to record lows of 2%, 2.5%, and 1.5%, respectively.

It also cut big banks’ reserve requirement ratio by 200 bps to 12%, while those for thrift and rural lenders were trimmed by 100 bps to 3% and 2%, respectively.

Meanwhile, with the US economy still far from its inflation and employment goals it is too early for the Federal Reserve to discuss changing its monthly bond purchases, US Federal Reserve Chair Jerome Powell said last Thursday.

“Now is not the time to be talking about exit,” from the $120 billion in government securities the Fed is buying each month, Mr. Powell said in a web symposium with Princeton University, Reuters reported.

“The economy is far from our goals… and we are strongly committed… to using our monetary policy tools until the job is well and truly done,” Mr. Powell said, pushing back against recent suggestions from some of his colleagues that the Fed might consider trimming its bond purchases even later this year if vaccines supercharge an economic rebound. 

He said an interest rate increase as well would come “no time soon” given the depth of the economic problems related to the still-raging health crisis.

Meanwhile, a bond trader said the slight uptick in the rate of 91-day T-bills on Monday could be attributed to investors minimizing potential risks in their search for higher yields.

“More people now want to park their cash at a higher rate and be protected from a sudden increase in rate at the same time. So instead of 91-day, they go straight to six-month or one-year [papers] for better yield pickup,” the trader said via Viber.

“And then there are funds that don’t want to be exposed to bonds longer than three-year in case there is a sudden economic turnaround that will push rates higher,” the trader added.

The Treasury plans to borrow P140 billion from the local debt market this month: P80 billion via weekly auctions of T-bills and P60 billion from fortnightly Treasury bond offerings.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga

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