THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Monday amid lower rates and strong bids, as the market welcomed the central bank’s stimulus measures, such as last week’s off-cycle rate cut.

The Bureau of the Treasury (BTr) awarded P24 billion in T-bills, P4 billion more than its initial offer of P20 billion as total bids for the short-term papers hit P80 billion.

Amid strong demand and low rates, the BTr also opened its tap facility to raise another P10 billion via the one-year securities.

Broken down, the BTr raised P7 billion in 91-day papers, more than the initial P5-billion offer as the tenor attracted bids worth P33.01 billion. The three-month papers fetched an average rate of 3.113%, down 35.8 basis points (bps) from the previous rate of 3.471% last week.

It also upsized its award of 182-day papers to P7 billion from the P5-billion plan, as total tenders reached P21.125 billion. The six-month papers yielded an average rate of 3.239%, lower by 17 bps from 3.409% previously.

For the 364-day papers, the BTr fully awarded P10 billion as planned out of total bids worth P25.864 billion. The average rates for the one-year securities dropped 39 bps to 3.295% from 3.685% previously.

National Treasurer Rosalia V. de Leon said they upsized the award after rates dropped following the 50-bp cut in benchmark interest rates fired off by the Bangko Sentral ng Pilipinas (BSP) last week.

“Accepted more than offer because double non com award. Open tap for P10 billion for 364-day with significant drop in rates [following] 50 bps off-cycle cut,” Ms. De Leon told reporters via Viber.

Ms. De Leon added that due to the strong appetite observed for the one-year T-bills, they decided to cut the offer of 91-day papers to P5 billion from P10 billion in previous auctions and increased the offer size for the 365-day T-bills to P10 billion from P5 billion previously.

“Previous auctions saw strong appetite for one-year (papers) for yield pickup and incremental liquidity from P120 billion maturity,” she said.

A bond trader said they expect yields to drop after the BSP fired off stimulus measures that helped boost liquidity in the market and as long as there are “no other negative news.”

“We expect this downward momentum in yields to persist on back of liquidity boost from BSP. Recent moves by BSP add to investor confidence,” the trader said via Viber.

“BSP lowered the rates, and has lowered RRR (reserve requirement ratio) which freed up significant liquidity. But since there is less economic activity, there will be less loan availments. Banks will then have to put the excess funds in government bonds,” the trader said.

The BSP Monetary Board, in an off-cycle meeting last Thursday, cut the key policy rate or the overnight reverse repurchase rate to 2.75%. Accordingly, interest rates for the central bank’s overnight deposit and lending facility have been trimmed to 3.25% and 2.25%, respectively.

These rates are the lowest on record and also since the BSP shifted to an interest rate corridor in 2016.

The cut came less than a month after the 50-bp reduction in a scheduled Monetary Board meeting on March 19, which took effect on March 20.

For this year alone, the central bank has slashed rates by a total of 125 bps after a 25-bp cut on Feb. 6. This followed 75 bps in cuts implemented in 2019. This means the BSP has completely unwound the 175 bps in hikes done in 2018.

The BSP also slashed the RRR of universal and commercial banks by 200 bps earlier this month, with analysts projecting another 200-bp cut to boost liquidity.

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