THE GOVERNMENT upsized the Treasury bills (T-bills) it awarded on Monday as rates continued to decline on expectations of further monetary easing.
The Bureau of the Treasury (BTr) raised P24 billion via T-bills yesterday, higher than the programmed P20 billion. The auction saw bids reaching P94.3 billion, making the offer almost five times oversubscribed.
To accommodate excess demand, the BTr opened the tap facility for another P10-billion offer of one-year instruments.
Broken down, the BTr borrowed P5 billion in 91-day T-bills as planned out of total tenders worth P19.9 billion. Rates for the three-month papers dipped 3.2 basis points (bps) to 2.058% from 2.09% fetched in the auction last week.
The government also accepted P5 billion in bids for the 182-day securities as programmed from total offers of P20.6 billion. The six-month papers fetched an average rate of 2.114%, down 7.9 bps from 2.193% previously.
Meanwhile, for the 364-day papers, it upsized to P14 billion the volume that it raised from its program of P10 billion as the tenor attracted bids worth P53.88 billion. The one-year securities were quoted at an average rate of 2.508%, also down 14.5 bps from 2.653%.
National Treasurer Rosalia V. de Leon said the rates at yesterday’s auction went down further on robust liquidity and as investors expect the Bangko Sentral ng Pilipinas (BSP) to slash banks’ reserve requirement ratio (RRR) anew.
“Rates still lower than previous auction and secondary levels. Sentiment supported by ample liquidity and possible BSP action to trim RRR again,” Ms. De Leon told reporters via Viber.
BSP Governor Benjamin E. Diokno on Monday said the central bank will likely stick to traditional monetary measures in the meantime to help cushion the economy from the impact of the coronavirus pandemic as it still has “a lot of leeway” to bring down benchmark interest rates and RRR.
The regulator slashed universal and commercial banks’ RRR by two percentage points to 12% in April.
A bond trader said the results of the auction signaled that investors might have started to price in another policy rate cut from the Monetary Board after rates for 91- and 182-day papers sank below the floor rate of 2.25%.
Benchmark interest rates are currently at record lows of 2.75% for the overnight reverse repurchase facility, 3.25% for overnight lending and 2.25% for overnight deposit after the BSP’s Monetary Board cut interest rates by a total of 125 bps so far this year following 75 bps in reductions last year.
“[Also], market is trying to look for placement that will beat inflation. 91- and 182-day papers won’t give you enough cushion,” the trader added.
On Wednesday, the Treasury will offer P30 billion in reissued five-year Treasury bonds (T-bond) with a remaining life of four years and four months and a coupon of 4.25%.
The government is planning to borrow P170 billion from the local market this month: P110 billion via its weekly T-bill auctions and the remaining P60 billion via T-bonds to be offered fortnightly. — Beatrice M. Laforga