THE GOVERNMENT fully awarded the Treasury bills (T-bills) it offered on Monday as rates declined across-the-board following the central bank’s decision to cut rates last week.

The Bureau of the Treasury (BTr) raised P20 billion as planned via the T-bill auction yesterday as the offer was nearly three times oversubscribed, with total tenders reaching P56.3 billion.

Broken down, the Treasury accepted P6 billion as planned from the 91-day T-bills out of P18.405 billion worth of bids. The three-month papers yielded an average rate of 3.115%, lower by 7.2 basis points (bps) from the 3.187% fetched during the auction on Feb. 3.

It also made a full award of P6 billion worth of 182-day papers at an average rate of 3.461%, down by 6.2 bps from the previous week’s yield of 3.523%.

For the 364-day papers, the BTr raised P8 billion as programmed out of tenders amounting to P21.08 billion. The one-year securities likewise fetched a lower rate of 3.908% against the 3.964% quoted previously.

Rates for the 91-, 182- and 364-day T-bills closed at 3.239%, 3.463% and 3.93% at the secondary market on Monday, according to the PHP Bloomberg Valuation Service Reference Rates.

Following the auction on Monday, Deputy Treasurer Erwin D. Sta. Ana said the turnout was within expectations as the market reacted to the 25-bp cut by the Bangko Sentral ng Pilipinas (BSP) Monetary Board as well as BSP Governor Benjamin E. Diokno’s hint of another cut by midyear during an interview with Bloomberg TV on Friday.

“[The lower rates were due to] the rate cut last week and the news for a further cut midyear based on Governor Diokno’s pronouncements. It is reported that the inflation outlook is quite manageable, hence the reduction in the rates,” Mr. Sta. Ana said.

The reverse repurchase rate now stands at 3.75%, while the rate of the overnight lending and deposit facilities are now at 4.25% and 3.25%, respectively.

A bond trader, meanwhile, said the auction was met with strong demand as investors are attracted to “shorter and safer securities in the midst of the novel coronavirus scare,” driving the rates yesterday to decline as well.

According to preliminary estimates by the National Economic and Development Authority (NEDA), a prolonged 2019-nCoV outbreak in the country will largely hurt the tourism sector and might dent the economy by around 0.3% if the virus is felt until June and rise further by around 0.7% if it stays until December.

Onshore jumbo issuance in second half

Meanwhile, Mr. Sta. Ana said the Treasury has already settled its €1.2-billion euro-denominated, multi-tenor bonds it issued in January, while it is set to issue today the P310.8 billion worth of three-year retail Treasury bonds (RTB) it sold earlier this month.

The RTBs sold last week will be the Treasury’s largest issuance to date, exceeding the P255 billion sold in 2017.

Mr. Sta. Ana said the next jumbo issuance for the local debt market will likely happen in the second half of the year, depending on the government’s disbursement performance.

“We will look at how the disbursements go but…we’re looking at the second half for another jumbo. It’s more of when we will finance the deficit, so we will have to look into the performance of the disbursements. Now, we’ve observed that it’s quite elevated. We will see if that trend will continue on. I guess the optimal timing for a new jumbo will have to be third or fourth quarter,” Mr. Sta. Ana told reporters.

As for the Treasury’s planned dollar bond offer, he said they are still monitoring the market but noted there is room for such an issue.

“Everything’s in place so it’s really on the timing of the transaction, and especially also, we’ll check our cash buffer. That’s also a consideration (for the dollar bond issue),” he said.

The government has already secured the needed approvals for the dollar issuance from regulators.

The state plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga