THE Bureau of the Treasury (BTr) awarded in full the P30 billion on offer for reissued 10-year Treasury bonds (T-bonds) as investors flocked on Tuesday’s auction.
Strong liquidity is present in the market as the auction was oversubscribed by more than 2.5-times as total tenders reached P83.589 billion.
The 10-year T-bonds fetched an average rate of 4.409 percent, lower by 20.8 basis points from the previous auction last November 12, 2019, when the security was capped at 4.617 percent. The BTr said the latest issuance brings the total outstanding volume of the series to P170 billion.
The BTr’s 10-year T-bonds carried a coupon rate of 6.875 percent with a maturity date of January 10, 2029.
National Treasurer Rosalia V. De Leon explained the results of Tuesday’s auction were still driven by the continuing concerns by investors on the coronavirus 2019 (Covid-19) as well as in anticipation of another looming rate cut from the Bangko Sentral ng Pilipinas (BSP) by the second quarter of the year.
Meanwhile, De Leon announced after Tuesday’s auction that given the oversubscription, Treasury officials decided to open an additional P15 billion for the reissued 10-year T-bond under the BTr’s tap facility.
“We see oozing liquidity: almost P84 billion against our P30 billion offer,” she said. “The rates are aligned with [the rates at the] secondary trade. [The] last secondary trade this morning [was] about 4.4-percent flat for about P200 million. We’re opening the tap [facility] for another P15 billion given substantial bids that were given during the auction; half of what we offered.”
De Leon explained while the move enabled the regulator to siphon “some of the liquidity with the RTB [retail Treasury bond], it will also be plowed back to the market given that it will be dispersed in the form of infrastructure and payments of account payables of agencies, [among others].”
There would be an “unwinding [in the transaction] because it’s [liquidity] going back to the market,” she added.
On Monday, the BTr also fully awarded an additional P7.7-billion worth of P364-day Treasury bills under its tap facility at an average annual rate of 3.836 percent.
As a “preemptive” move to “support market confidence” amid economic headwinds including the coronavirus outbreak, the BSP decided to cut the interest rate on its overnight reverse repurchase facility by 25 basis points to 3.75 percent.
The interest rates on the overnight lending and deposit facilities were reduced to 4.25 percent and 3.25 percent, respectively.
The Economic Research Unit (ERU) of Union Bank of the Philippines said in a brief on February 13 it believes that the other 25 bps cut by the BSP “may be pushed earlier than expected.” “Furthermore, if and when the outbreak lasts longer than anticipated—SARS outbreak lasted about 7 months to 8 months—there may be more easing actions from the Philippine central bank to help cushion the impact on economic growth.”