THE GOVERNMENT fully awarded the 35-day Treasury bills (T-bills) it auctioned off on Tuesday as its rate dropped on strong demand, driven by the surprise rate cut from the central bank.

The Bureau of the Treasury (BTr) on Tuesday raised P15 billion as planned via the 35-day T-bills out of bids worth P62.541 billion or more than four times the offer volume.

The 35-day papers were quoted at an average rate of 1.684%, dropping 41.7 basis points (bps) from the 2.101% logged during the June 16 auction.

National Treasurer Rosalia V. de Leon said the yield was a record low for the 35-day T-bills.

Ms. De Leon said they kept the award at the programmed level despite the strong demand since the tenor is “very short.”

She also attributed the decline in yields sought by banks to the Bangko Sentral ng Pilipinas’ (BSP) move to cut benchmark rates by 50 bps last week.

Rates now stand at record lows of 2.25%, 2.75 and 1.75% for BSP’s overnight reverse repurchase, lending and deposit facilities, respectively.

The central bank has slashed rates by 175 bps so far this year as it looks to cushion the economic impact of the coronavirus disease 2019 (COVID-19).

A bond trader shared the same view, noting the results of the auction were within market expectations.

“The move was quite expected due to market’s reaction on BSP policy move,” the trader said via Viber.

Moving forward, the trader said rates of government securities may drop further as market participants are expected to turn to debt papers with longer maturities in search of higher yields.

“We can expect that the yields will trend lower as dealers looking for yields may shift to longer-tenored bonds,” the trader said.

The government has set a P205-billion borrowing program for July and will offer P145 billion in T-bills via weekly auctions and P60 billion in Treasury bonds to be auctioned off every other week.

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