THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday as rates were mostly lower on strong demand ahead of the central bank’s policy meeting this week.
The Bureau of the Treasury (BTr) borrowed P22 billion via the T-bills as the offer was more than thrice oversubscribed, with bids amounting to P71.941 billion. Monday’s award was higher than the planned P20 billion as it accepted more bids for the 91-day papers from small investors.
Broken down, the Treasury awarded P7 billion in the 91-day T-bills out of total tenders of P26.580 billion. Its average rate stood at 1.121%, down 3.5 basis points (bps) from the 1.156% seen during last week’s auction. The government doubled the accepted non-competitive bids to P4 billion, which caused its award of the tenor to increase from the initial offer of P5 billion.
The BTr also borrowed the programmed P5 billion in 182-day papers as bids reached P15.683 billion. The papers were quoted at an average rate of 1.601%, down 1.4 bps from 1.615% previously.
The government likewise awarded P10 billion in 364-day papers as planned as tenders reached P29.678 billion. The one-year debt fetched an average rate of 1.888%, up 0.8 bp from 1.850% in the previous auction.
National Treasurer Rosalia V. de Leon said the rates fetched for the T-bills on Monday reflected the strong liquidity in the financial system.
“There is still good liquidity [in the market] as shown by high bids to offer. But given expectations for a pause on policy rates, there was a slight movement in one-year [debt],” Ms. De Leon said.
Meanwhile, a trader said the auction result came as expected as investors are looking for better yields.
“Strong volume participation was noted as the markets continue to put their excess cash into work ahead of the BSP’s Monetary Board meeting on Thursday and the release of the BTr’s borrowing program for the month of October,” the trader said via Viber.
The BSP will likely leave benchmark interest rates untouched this Thursday as previous cuts have yet to be completely felt in the financial system, with the central bank seen leaving some room to adjust in case recovery lags.
A BusinessWorld poll held last week showed 14 out of 15 analysts expect the Monetary Board to keep interest rates steady at its meeting on Oct. 1, which is its fifth policy review for the year.
The BSP has cut rates by 175 bps thus far this year, bringing the rates on its overnight reverse repurchase, lending, and deposit facilities to record lows of 2.25%, 2.75% and 1.75%, respectively.
BSP Governor Benjamin E. Diokno last week said the central bank may maintain the low interest rate environment in the next two years to support the economy amid the coronavirus pandemic.
Another trader said investors are also looking ahead to the release of latest inflation data.
“It looks like the T-bill yields will remain at these levels unless there are market-moving news such as the latest inflation rate,” the second trader said via Viber.
The Treasury wanted to raise P160 billion from the domestic market this month — P100 billion via weekly auctions of T-bills and P60 billion via Treasury bonds to be offered fortnightly — but made partial awards and rejections as investors asked for higher rates. It is due to release its October borrowing program within the week.
The government is looking to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — K.K.T. Jose