THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday as rates moved sideways on strong investor demand and dovish hints from the central bank.
The Bureau of the Treasury (BTr) raised P15 billion as planned via the T-bills on Monday as the offer was more than four times oversubscribed, with total tenders reaching P63.273 billion. This was also bigger than the P56.91 billion in bids seen at last week’s auction.
Broken down, the Treasury raised P5 billion as programmed via the 91-day debt papers from P17.645 billion in bids. The three-month T-bills fetched an average rate of 1.079%, up by 0.1 basis point (bp) from 1.078% in the previous auction.
The BTr also borrowed P5 billion as planned via the 182-day T-bills as the tenor attracted tenders worth P25.312 billion. The average yield of the six-month instruments slipped 0.3 bp to 1.402% from 1.405% a week ago.
Lastly, the government made a full P5-billion award of the 364-day securities it offered on Monday as total bids reached P20.316 billion. The average rate of the one-year T-bills stood at 1.604%, dropping by 0.5 bp from 1.609%.
National Treasurer Rosalia V. de Leon said investors priced in recent comments from Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, who said the central bank will keep rates low to help the economy recover as the coronavirus pandemic continues.
Mr. Diokno last month said the BSP will keep its policy stance supportive of the economy as long as inflation remains stable.
He also said over the weekend that the central bank is open to extending loans to the government “for as long as necessary.”
In July, the Monetary Board extended the maturity of the P540-billion short-term, no-interest loan to the National Government, which is expected to be repaid in October. This was the fourth time the BSP granted direct advances to the government since the pandemic.
Republic Act 7653 or The New Central Bank Act allows the BSP to lend 20% of its average revenue to the government, which is equivalent to P540 billion. This was increased to 30% or up to P850 billion by the Republic Act 11494 or the Bayanihan to Recover as One Act, which allowed direct provisional advances within two years since the law’s effectivity.
The central bank has been at the forefront of pandemic relief efforts. After cutting the key rate by 200 basis points in 2020, the BSP has maintained it at a record low of 2%, citing the need to support the economy’s recovery.
The Monetary Board will have a policy meeting on Sept. 23.
Meanwhile, a bond trader said rates moved sideways at Monday’s auction on strong demand from market players.
The trader said this sideways movement of T-bill rates may continue for the rest of the month as the financial system is still awash with cash and as demand for short-term safe-haven assets remains healthy.
On Tuesday, the BTr will auction off P35 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 10 months.
It is looking to raise P250 billion from the local market this month: P75 billion via weekly offers of T-bills and P175 billion from weekly auctions of T-bonds.
The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of gross domestic product. — B.M. Laforga