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Gov’t fully awards offer of T-bills

THE GOVERNMENT made a full award of Treasury bills (T-bills) it offered on Monday as yields declined across the board on the back of ample liquidity among investors and the central bank’s surprise rate cut last week.

The Bureau of the Treasury (BTr) borrowed P20 billion as planned via the T-bills as the offer was almost four times oversubscribed, with bids amounting to P73.42 billion.

Broken down, the BTr borrowed the programmed P5 billion through the 91-day T-bills as tenders reached P18.85 billion. The three-month debt’s average rate fell below one percent and fetched 0.986%, down by 3.3 basis points (bps) from the 1.019% seen in the previous auction.

The Treasury also awarded another P5 billion as planned in 182-day debt as bids amounted to P20.8 billion. The six-month papers were quoted at an average rate of 1.385%, declining by 5.8 bps from the 1.443% logged in last week’s offering.

Lastly, the government made a full P10-billion award of the 364-day securities as tenders totaled P33.77 billion. The average rate of the one-year securities was at 1.695%, lower by 5 bps from the 1.745% seen during last week’s auction.

The BTr also opened its tap facility to raise another P5 billion in one-year papers to take advantage of the strong demand and lower rates seen at yesterday’s auction.

National Treasurer Rosalia V. de Leon said the yields on the short-term debt papers continued to decline as the market continues to look for investment outlets for their excess cash amid the coronavirus pandemic.

“Rates will trend downward for short tenors [which will be] fueled by a bias for the front end with high volume of liquidity,” Ms. De Leon told reporters in a Viber message after the auction.

A trader, meanwhile, said yields on the T-bills declined following the Bangko Sentral ng Pilipinas’ (BSP) move to cut benchmark rates anew on Thursday.

“Liquidity continues to flow its way to short-term papers such as T-bills. Yields saw a general decline week on week after BSP surprised with a policy rate cut,” the trader said via Viber.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said investors continue to prefer the short-term debt, as seen in the oversubscription of yesterday’s offering.

“This week also will not feature a Treasury bond (T-bond) issuance, so investors opted to park more in the longer dated T-bills,” Mr. Mapa said in an e-mail.

The BSP unexpectedly cut benchmark rates to new record lows on Thursday, the fifth reduction this year, citing the continued uncertainty caused by a fresh surge in coronavirus cases globally and the impact of recent typhoons on the struggling economy.

The Monetary Board on Thursday trimmed the rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities by 25 bps to 2%, 2.5%, and 1.5%, respectively.

The latest easing move followed a “prudent pause” by the central bank since its June meeting. The central bank has already cumulatively lowered interest rates by 200 bps. The central bank also upgraded its inflation forecast this year to 2.4% from the 2.3% it gave in the October meeting.

On the other hand, the inflation outlook for 2021 and 2022 were lowered to 2.7% (from 2.8%) and 2.9% (from 3%), respectively, due to the slower-than-expected pickup in domestic activity, the decline in global crude oil prices, and the strengthening of the peso.

The Treasury wanted to borrow P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond auctions. Yesterday’s offering was the last one for November.

During the month, it made full awards of its offerings of government securities and even upsized its borrowings and opened its tap facility several times as demand stayed strong, with the market looking for safe investment outlets to put their excess cash to work.

It is also offering another tranche of Premyo bonds to raise at least P3 billion. The offer period is set to run from Nov. 11 to Dec. 18.

The government wants to raise around P3 trillion this year from local and foreign lenders to help fund its budget deficit, which is expected to hit 9.6% of the country’s gross domestic product. — KKTJ

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