Gov’t makes full award of T-bills as investors flock to safe havens

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THE GOVERNMENT fully awarded the Treasury bills (T-bills) it offered on Monday as rates declined across-the-board, also opening its tap facility to sell more one-year papers amid strong demand.

The Bureau of the Treasury (BTr) raised P20 billion in T-bills yesterday after its offer was almost four times oversubscribed, with total bids reaching P78.3 billion.

Broken down, the government accepted P6 billion via the 91-day papers as planned from total bids of P21.798 billion. The three-month papers fetched an average rate of 3.072%, down by 4.3 basis points (bps) from the 3.115% quoted in the auction last week.

The Treasury raised another P6 billion as programmed via the 182-day papers from total tenders amounting to P20.792 billion at an average rate of 3.42%, which was 4.1 bps lower than the 3.461% yield last week.

For the 364-day T-bills, the government accepted P8 billion as planned at an average rate of 3.836%, also lower by 7.2 bps from the 3.908% fetched the previous week.

Following the auction, National Treasurer Rosalia V. de Leon said they opened the tap facility to offer another P8 billion in one-year T-bills to accommodate the strong demand for the tenors, which reached a total of P35.755 billion yesterday.

At the secondary market’s close on Monday, the 91-, 182- and 364-day T-bills fetched rates of 3.181%, 3.433% and 3.889%, respectively.

“Going into the auction, it is the result of, first, the lingering concerns on COVID-19 (coronavirus disease 2019), of course, we’ve seen rates going down from the revision of the outlook of Fitch [Ratings] from stable to positive,” Ms. De Leon told reporters after the auction on Monday.

A bond trader said the lower rates fetched for the T-bills at the auction were within expectations as the market continues to have strong demand for the short tenors.

“Also, the market got excited again because of the pronouncement of BSP (Bangko Sentral ng Pilipinas) Governor Benjamin E. Diokno for another rate cut in the second quarter. I think those are the expectations. They see the flight to safe havens, and of course that’s the Treasury bonds. So we are seeing that our liquidity is going back to government securities market.

Mr. Diokno said last week that the central bank may cut rates by another 25 bps as early as the second quarter to shield the economy from the effects of the COVID-19 outbreak and as it continues to dial back the 175 bps worth of hikes done in 2018.

The BSP’s policy-setting Monetary Board will have its second rate-setting meeting for the year on March 19. At its meeting on Feb. 6, it already reduced benchmark interest rates by 25 bps.

The rates on the BSP’s reverse repurchase, overnight lending and deposit facilities now stand at 3.75%, 4.25%, and 3.25%, respectively.

Last year, the central bank eased policy rates by a total of 75 bps amid slowing inflation.

Meanwhile, Ms. De Leon said they are focusing on domestic borrowings right now as they are still monitoring the global bond market amid the virus outbreak.

“Given lingering concerns on the outbreak, I think it is still very tepid for the moment in terms of other issuances. But we’re seeing US Treasuries go down… [we might do other offshore issuances] kapag medyo na-reduce na ’yung concerns sa COVID-19 (when concerns over COVID-19 subside)… We can still tap the onshore peso [market],” Ms. De Leon said.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via Treasury bonds. — BML