THE GOVERNMENT fully awarded the Treasury bills (T-bills) it offered on Monday after yields declined across all tenors on the back of strong demand.

It also conducted an over-the-counter sale of the 364-day securities for government-owned and -controlled corporations to accommodate strong demand.

The Bureau of the Treasury (BTr) raised P20 billion from the T-bills yesterday as the auction was more than three times oversubscribed, with total bids amounting to P70.9 billion.

Broken down, the Treasury awarded P6 billion as planned via the 91-day papers amid total bids of P21.596 billion. The three-month papers fetched a lower average rate of 3.003% versus the 3.072% seen in the previous auction on Feb. 17.

Another P6 billion was raised via the 182-day papers as programmed out of total tenders worth P21.06 billion. The six-month T-bills were quoted at an average rate of 3.365%, down by 5.5 basis points (bps) from the 3.42% fetched previously.

For the 364-day securities, the Treasury accepted P8 billion as planned from total bids worth P28.21 billion. The one-year securities fetched an average rate of 3.787%, lower by 4.9 bps from the previous 3.836% rate.

At the secondary market, yields on the three-month, six-month, and one-year T-bills stood closed at 3.092%,3.408%, and 3.865% yesterday, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

Deputy Treasurer Erwin D. Sta. Ana told reporters that the lower rates seen for the T-bills yesterday were within market expectations given the robust liquidity in the market.

“[The lower rates were also driven by] the pronouncement of BSP (Bangko Sentral ng Pilipinas) Governor of a possible second quarter cut and possibly,” Mr. Sta. Ana said following the auction.

For Robinsons Bank Corp. sovereign debt trader Kevin S. Palma, “investors went on with their bullish ways for local bonds as the coronavirus continue to destruct human health to go with its possible implications in global growth.”

Earlier this month, BSP Governor Benjamin E. Diokno said another 25-bp rate cut is possible as early as the second quarter to cushion the impact of the coronavirus disease (COVID-19) outbreak on the local economy. This follows the 25-bp cut announced at the BSP Monetary Board’s Feb. 6 policy meeting.

At home, the National Economic and Development Authority (NEDA) has said the Philippine economy could lose 0.3% if the virus lasts until June, and further rise to 0.7% of gross domestic product (GDP) if it lingers until yearend, considering a 100% reduction on inbound tourists from China and 10% from other foreign tourist arrivals.

Mr. Sta. Ana also said the decline in yields on US Treasuries also contributed to lower rates of securities in the local bond market.

Reuters reported last week that the benchmark 10-year US Treasuries’ yield declined by 6.4 bps on Feb. 21 morning, US time, to trade at 1.4611%. This was the first time the tenor’s rate went below the 1.5% level since early September last year, the report said.

It attributed the downward trend to the rising concerns on the effect of COVID-19, prompting investors to flock into safer assets.

For the longer 30-year tenor, Reuters said its yield dropped by 7.1 bps, sinking to an “all-time low” of 1.901% that same day.

According to the Bloomberg website, the 10-year US Treasury’s rate was at 1.47% at the time of this story’s writing, while the 30-year notes’ yield was at 1.91%.

“Market players now may be fixated that more monetary easing around the world, US Federal Reserve included, may be imminent to combat the effects of the virus to the global economy,” Mr. Palma added.

OFFSHORE ISSUANCES
Meanwhile, Mr. Sta. Ana said the BTr will still proceed with its initial plan to offer its other offshore issuances within the first half of the year.

“As we speak, we haven’t really been discussing about delaying our plans to tap offshore markets because of COVID-19. We are still, for example, the US dollar, it’s still being considered. But on the other markets, we have already stated it could probably anytime within the first half of the year, that hasn’t changed as of now. For panda (and) samurai (markets), it’s all on the table,” he 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.

The government 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 GDP. — Beatrice M. Laforga

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