THE GOVERNMENT fully awarded the Treasury bills (T-bills) it offered on Monday as yields declined across all tenors, supported by the additional liquidity in the financial system.
The Bureau of the Treasury (BTr) decided to fully award the short-termed securities, raising the P15 billion it placed on the auction block yesterday.
The offered volume was more than twice oversubscribed, with total tenders received at the auction totalling P37.909 billion, albeit slightly lower than the P38.856 billion logged a week ago.
Bids for the 91-day T-bills amounted to P13.8 billion, nearly thrice the programmed P5 billion that the BTr fully awarded yesterday. The average rate declined by 13.7 basis points to 3.3% from the 3.437% logged in the previous auction.
The Treasury also made a full award of its P4-billion offer of 182-day papers. Total tenders reached almost thrice the offered amount at P13.574 billion. Yields also dropped by 17.9 basis points to 3.7% from the 3.879% quoted for the T-bills at last week’s auction.
The government also borrowed P6 billion as planned via the 364-day securities, with tenders amounting to P10.535 billion. The average rate on the papers also slid by 9.9 basis points to 4.198% from 4.297% in the previous auction.
At the secondary market, prior to the auction, the three- and six-month bills were quoted at 3.6679% and 4.0321% respectively, and 4.0143% for the one-year debt papers.
At the market’s close, all T-bill tenors rallied to close at lower yields. The 91-day, 182-day and 364-day papers fetched 3.3821%, 3.7129% and 4.0136%, respectively.
National Treasurer Rosalia V. De Leon said on Monday that the auction was well-received by investors on the back of expectations of additional liquidity following the central bank’s move to cut the reserve requirement ratio (RRR) imposed on lenders.
“Following the release of the [reserve requirement] cut and then the maturity of P120 billion [in securities], combined together, we see liquidity flowing into the system,” Ms. De Leon told reporters yesterday.
The Bangko Sentral ng Pilipinas announced last week that the RRR imposed on universal and commercial banks will be trimmed by a percentage point to 18% effective June 1. The reserve requirement cut is seen to free up an estimated P90 billion in additional money supply.
The move also came following the maturity of around P130 billion in previously issued peso-denominated debt notes last week.
A trader interviewed yesterday said the lower rates seen yesterday were expected.
“The outcome of the bill auction was better than expected because we expected lower yields by five basis points, and the results were lower than that,” she said over the phone.
The trader added that the yields were lower due to increased investor demand.
“This was due to the demand coming from the maturities…last week, and also from the recent RRR cut by the BSP. We see some players probably positioning already the liquidity coming from those.”
STRONG DEMAND FOR RTB
Meanwhile, Ms De Leon said the Treasury expects similarly good investor demand for its retail Treasury bond (RTB) offering this week.
The Treasury will offer up to P30 billion in three-year retail bonds to individual investors. This is the first RTB offering of the government this year, following a similar issuance in November 2017
Ms. De Leon said the papers will likely be met with ample demand amid improved liquidity in the financial system following maturities and the RRR cut.
“Also, given that the tenor [of the bonds are at] the three years, so that’s the sweet spot for the investors,” she said.
Ms. De Leon said proceeds from the RTBs will be used to fund the government’s budget deficit for the year as well as the prior rejections made by the BTr in previous T-bill and Treasury bond auctions.
The Treasury tapped Land Bank of the Philippines to be the lead issue manager for the RTBs, while Development Bank of the Philippines, BDO Capital & Investment Corp., Metropolitan Bank & Trust Co., BPI Capital Corp. and SB Capital Investment Corp. will serve as issue managers.
The government borrows from local and foreign sources to fund increased spending and boost economic activity.
It plans to borrow a total of P888.23 billion this year to plug its budget deficit that is capped at three percent of the country’s gross domestic product. — Karl Angelo N. Vidal

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