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Gov’t hikes award of T-bills as investors flock to safer assets

THE GOVERNMENT hiked the volume of Treasury bills (T-bills) it awarded on Monday as rates went down across the board, with investors flocking to the safe-haven securities following the reimposition of stricter restrictions in the capital and nearby provinces.

The Bureau of the Treasury (BTr) borrowed P24 billion via the T-bills on Monday, more than the programmed P20 billion, as total tenders hit P79.33 billion or almost four times the amount on offer. The bids also climbed from the P64 billion in demand seen the previous week.

It also opened its tap facility to offer P5 billion in one-year T-bills.

Broken down, the BTr raised P7 billion from the 91-day debt, higher than the P5-billion program, with bids reaching P22.357 billion. The average rate of the three-month papers went down by 6.7 basis points (bps) to 1.269% from the 1.336% fetched last week.

It borrowed another P7 billion from the 182-day T-bills, more than the P5-billion plan, after the tenor attracted demand worth P21.507 billion. The average yield of the six-month debt fell by 10.9 bps to 1.609% from 1.718% previously.

Lastly, the Treasury made a full P10-billion award of the one-year securities on offer as tenders hit P35.466 billion. The 364-day T-bills fetched an average rate of 1.926%, down by 7.1 bps from the 1.997% quoted for the tenor last week.

“[We] see rates moderating as investors again flock to safe-haven assets,” National Treasurer Rosalia V. de Leon said in a Viber message to reporters after the auction on Monday.

Ms. De Leon said there is still enough liquidity in the financial system. She noted that the recent spike in inflation, which has been a growing concern among investors, is only transitory, as emphasized by the central bank in its latest meeting.

Meanwhile, a bond trader said the rates of short-term government securities went down on strong investor demand as the stricter lockdown imposed in the capital and surrounding provinces raised questions about the economy’s prospects for recovery.

Metro Manila, Bulacan, Cavite, Laguna and Rizal have been placed under the strictest form of lockdown again for one week starting Monday in a bid to curb the surge in coronavirus disease 2019 (COVID-19) cases.

Economists warned the tighter measures will hamper the economy’s rebound as it dampens confidence among consumers, businesses and investors.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) last week kept benchmark rates steady at record lows despite rising inflation as it supports an economy whose recovery is at risk from a renewed surge in COVID-19 infections.

The Monetary Board kept the overnight reverse repurchase rate at an all-time low of 2% for a third consecutive meeting. Rates for the overnight lending and deposit facilities were also maintained at 2.5% and 1.5%, respectively.

The central bank has kept borrowing costs unchanged since its December meeting, but BSP Governor Benjamin E. Diokno has said they will respond accordingly when the need arises, especially if rising inflation causes second-round effects.

Headline inflation reached 4.7% in February, the highest since the 5.1% in December 2018.

The central bank upwardly revised its inflation outlook to 4.2% this year from the forecast of 4% given in February. The average print for 2022 is seen at 2.8%, slightly higher than the previous projection of 2.7%.

The central bank chief also said on Wednesday that 2021 is “too early” for the BSP to unwind the easy policy it implemented at the height of the pandemic as the economy is still recovering. He said there is a need to maintain monetary policy accommodations for the BSP’s price and financial stability objectives.

Excluding the result of the tap facility auction on Monday, the BTr raised P169 billion from the domestic bond market this month, higher than the programmed P160 billion. This is composed of P109 billion in T-bills and P60 billion in Treasury bonds (T-bonds)

The Treasury wants to raise P170 billion from the local bond market next month, broken down into P100 billion in T-bills to be offered weekly and P70 billion via fortnightly auctions of T-bonds.

The government is looking to borrow P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga

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