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Gov’t makes full award of 35-day Treasury bills as demand climbs

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THE GOVERNMENT fully awarded the Treasury bills (T-bill) auctioned off on Tuesday and opened the tap facility for another P10-billion offer as investors holding excess cash flocked to safe-haven assets.

The Bureau of the Treasury (BTr) on Tuesday raised P15 billion as planned via the 35-day T-bills as its offer was more than four times oversubscribed, with total tenders reaching P62.2 billion.

The BTr also opened its tap facility to offer another P10 billion and take advantage of low rates offered and strong demand.

The 35-day papers fetched an average rate of 2.714%, 41.8 basis points (bps) lower than the 3.132% quoted at the secondary market yesterday.

This compares to the average rate of 3.39% this tenor would have fetched on March 31 had the BTr made a full award that time.

National Treasurer Rosalia V. de Leon said they opened the tap facility to accommodate the strong demand.

Carlyn Therese X. Dulay, Security Bank Corp. first vice-president and head of Institutional Sales, said rates dropped due to high demand and following the 50-bp off-cycle cut fired off by the Bangko Sentral ng Pilipinas (BSP) last week.

“The lower rate is attributable to the extremely high demand, as well as the lower policy rate after the 50 basis point cut by the BSP last week,” Ms. Dulay said via e-mail.

A bond trader said demand was strong as most investors prefer bonds or cash “at these uncertain times,” with those holding excess cash try to park their funds in safer assets, or government securities.

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.

Ms. De Leon said they will see if the 35-day T-bills will be included in their borrowing plan for next month following strong demand seen in yesterday’s auction.

For Ms. Dulay, “the strong demand is an indication that the market is highly interested in the 35-day bills, so it would be nice if the BTr continues to offer it.”

“Expect rates to stay range bound in the next few days as market awaits further news,” Ms. Dulay added.

The BTr reintroduced 35-day T-bills in its April borrowing plan, scheduling two auctions worth P15 billion each. The Treasury is expected to release its May borrowing plan this week.

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





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