THE GOVERNMENT upsized the volume of Treasury bills (T-bills) it awarded on Monday as strong demand pulled rates below the two-percent level following the surprise easing move by the central bank last week.

The Bureau of the Treasury (BTr) raised P26 billion in T-bills on Monday, higher than the programmed P20 billion. The short-term debt papers attracted bids worth P131.451 billion, making the offer more than six times oversubscribed.

To take advantage of strong demand, the BTr also opened the tap facility to offer another P10 billion in 364-day T-bills.

Broken down, the Treasury awarded P7 billion in 91-day papers, higher than the P5-billion program, out of total bids worth P28.74 billion. The three-month T-bills fetched an average rate of 1.746%, down 32.2 basis points (bps) from the 2.068% logged in last week’s auction.

Meanwhile, it made a full award of P5 billion in 182-day T-bills out of P32.173 billion in tenders. The average rate of the six-month papers also declined by 26.7 bps to 1.892% from 2.159% previously.

For the 364-day securities, the BTr hiked the awarded volume to P14 billion from the P10-billion program as total bids hit P70.538 billion. The one-year T-bills were quoted an average rate of 1.98%, dropping by 42.8 bps from the 2.408% last week.

A bond trader said in a Viber message that the strong demand and lower yields were due to the central bank’s move to slash benchmark interest rates by 50 bps last week to bring them to new record lows.

Rates on the central bank’s overnight reverse repurchase, lending and deposit facilities now stand at 2.25%, 2.75 and 1.75%, respectively.

The Bangko Sentral ng Pilipinas (BSP) has cut rates by a total of 175 bps so far this year to help mitigate the impact of the coronavirus disease 2019 (COVID-19) pandemic on the economy.

While the domestic market is evidently awash with cash, National Treasurer Rosalia V. de Leon said via Viber that the government also wants to avoid crowding out private sector issuances.

She said they decided to offer longer tenors in its borrowing program this month to accommodate investors looking for higher returns.

“We are stretching maturity as investors search for better yields,” she said.

In its July borrowing program, the BTr will offer P30 billion via seven-year Treasury bonds (T-bonds) on July 7 and another P30 billion via 10-year papers on July 21.

Asked if the government will consider issuing retail Treasury bonds (RTB) again, Ms. De Leon said: “RTB is always an option for us to raise funding and for small investors to deploy funds in supporting government priorities at this time particularly [in battling] against the COVID-19 [pandemic].”

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 T-bonds to be auctioned off every other week.

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