Government does not fully allocate treasury bills as rates move sideways

THE GOVERNMENT has fully awarded its offer of treasury bills. – NB FILE PHOTO

THE GOVERNMENT has made a total allocation of treasury bills (T-bills) il offst Monday as rates moved sideways due to strong investor demand and conciliatory hints from the central bank.

The Treasury Office (BTr) raised 15 billion pesos as planned via treasury bills on Monday, as the bid was more than four times oversubscribed, with total tenders reaching 63.273 billion pesos. It was also larger than the 56.91 billion peso auction seen in last week’s auction.

Broken down, the Treasury raised 5 billion pesos as scheduled via 91-day debt securities from 17.645 billion pesos in tenders. Three-month Treasury bills reached an average rate of 1.079%, up 0.1 basis point (bps) from 1.078% at the previous auction.

BTr also borrowed 5 billion pesos as planned via 182-day treasury bills, with the tenor attracting tenders worth 25.312 billion pesos. The average yield on six-month instruments slipped 0.3 bps to 1.402% from 1.405% a week ago.

Finally, the government made a full allotment of 5 billion pesos of the 364-day securities that it offered on Monday as total bids reached 20.316 billion pesos. The average one-year Treasury bill rate stood at 1.604%, down 0.5bp from 1.609%.

National Treasurer Rosalia V. de Leon said investors have valued recent comments from Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno, who said the central bank would keep rates low to help the economy to recover as the coronavirus pandemic continues.

Mr Diokno said last month that the BSP would maintain its policy of supporting the economy as long as that inflation remains stable.

He also said over the weekend that the central bank was prepared to grant loans to the government “as long as necessary”.

In July, the Monetary Board extended the maturity of the short-term, interest-free loan of 540 billion pesos to the national government, which is expected to be repaid in October. This was the fourth time the BSP has made direct advances to the government since the pandemic.

Republic Law 7653 or the new Central Bank Law allows the BSP to lend 20% of its average income to the government, which is equivalent to 540 billion pesos. This amount was increased to 30% or up to 850 billion pesos by Republic Law 11494 or the Bayanihan to recover as a single deed, which allowed direct provisional advances in the two years since th of the lawffactivity.

The central bank has been at the forefront of pandemic relief efforts. After lowering the policy rate by 200 basis points in 2020, the BSP kept it at a record low of 2%, citing the need to support the recovery of the economy.

The Monetary Council will hold a policy meeting on September 23.

Meanwhile, a bond trader said rates moved sideways during Monday’s auction due to strong demand from market participants.

The trader said this sideways move in Treasury bill rates could continue for the rest of the month as the financial system is still inundated with liquidity and demand for short-term safe-haven assets remains healthy.

On Tuesday, the BTr will auction off 35 billion pesos of reissued 10-year Treasury bonds (Treasury bonds) with a remaining term of nine years and 10 months.

It seeks to raise 250 billion pesos on the local market this month: 75 billion pesos via weekly offers of treasury bills and 175 billion pesos of weekly treasury bond auctions.

The government wants to borrow P3 trillion from domestic and external sources this year to help finance a budget ofFicit reached 9.3% of gross domestic product. – BM Laforga

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