THE GOVERNMENT fully awarded the Treasury bonds (T-bonds) it offered on Tuesday on the back of market demand for shorter tenors amid expectations of another policy rate cut soon.

The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued one-year T-bonds yesterday as tenders totaled P66.685 billion, more than twice its offer volume.

The one-year T-bonds with a remaining life of 11 months and eight days fetched an average rate of 3.675%, slightly lower than the 3.685% average rate fetched in Monday’s auction of 364-day T-bills.

To accommodate strong demand, the BTr also opened its tap facility to raise another P10 billion via the one-year bonds at the same rate.

National Treasurer Rosalia V. De Leon said they made a full award as rates sought by banks were within acceptable levels.

“Full award today. 2x bid cover ratio. Rate within secondary level. Liquidity is strong with accommodating statements from BSP (Bangko Sentral ng Pilipinas) Governor,” Ms. De Leon told reporters via Viber.

BSP Governor Benjamin E. Diokno on Sunday signaled a “deeper cut” in benchmark interest rates to support the economy amid an expected slowdown due to the coronavirus disease 2019 (COVID-19) pandemic.

The policy-setting Monetary Board has cut rates by a total of 150 basis points (bp) since 2019, almost completely unwinding the 175 bps in hikes it implemented in 2018 amid multi-year high inflation.

Its latest move was a 50-bp reduction on March 19, which brought the overnight reverse repurchase rate to 3.25% and overnight lending and deposit rates to 3.75% and 2.75%, respectively, in a bid to shield the economy from the virus fallout.

The Monetary Board will meet to discuss policy anew on May 21.

While noting that monetary policy works with a lag and that they will remain “data dependent,” Mr. Diokno said governments worldwide need to ensure a “soft landing” for their economies in the aftermath of the pandemic.

A bond trader said investors continue to prefer short-term securities given strong liquidity in the market after the RTB 3-8, or the retail Treasury bonds issued in 2017, matured on April 11.

“[It was a] good auction, shows appetite for short bonds. We have the recently matured 3-8 so marami pang (there is still) cash on standby, just waiting to be deployed at okay levels,” the trader said via Viber.

“Now, investors are comfortable up to [the] three-year space, especially with expectation of rate cuts,” the trader added.

Meanwhile, amid the rising expenses of the government as it seeks to respond to the COVID-19 outbreak, Ms. De Leon assured funding requirements for the cash aid for poor families and wage subsidy for employees of small businesses are ready for deployment.

“Yes, funds ready to deploy for social amelioration and wage subsidy,” she said.

The government allotted P205 billion for a two-month cash support program for some 18 million poor families and workers in the informal sector. A wage subsidy program was also approved Monday evening, under which it will give cash to employees of small businesses that had to halt operations due to the Luzon-wide lockdown.

These financial assistance programs will give eligible beneficiaries heavily affected by the lockdown P5,000-P8,000 in cash as relief.

The Treasury has set a P190-billion local borrowing program for April, broken down into P130 billion in Treasury bills and P60 billion in T-bonds. — B.M. Laforga

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