THE GOVERNMENT made another full award of the Treasury bills (T-bill) it auctioned off on Monday, with yields declining across the board following the announcement of a series of cut in big banks’ reserve requirement ratio (RRR).

The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction yesterday, with total bids amounting to P50.3 billion, more than thrice the amount it wanted to raise.

Broken down, the Treasury accepted P4 billion as planned for the 90-day papers out of the P16.16 billion offered by banks and other financial institutions. The average rate slipped 13.1 basis points (bp) to 5.258% from the 5.389% quoted in the previous offer.

The government also made a full award of the 182-day T-bills it placed on the auction block, borrowing P5 billion as planned versus total offers amounting to P17.938 billion. The average yield also declined by 6.8 bps to 5.7% from last week’s 5.768%.

The Treasury likewise fully awarded the 364-day debt papers, accepting P6 billion out of the total bids worth P16.17 billion. Its average yield slid 6.7 bps to 5.869% from the 5.936% tallied in the previous auction.

RRR REDUCTION
Following the auction, National Treasurer Rosalia V. De Leon said the results were within expectations.

“As expected, with the 200[-basis-point] reduction in the [reserve requirements], so you unleash more liquidity. Coupled with the previous policy cuts…we expect rates really to be going down significantly,” Ms. De Leon told reporters yesterday.

The Bangko Sentral ng Pilipinas (BSP) on Thursday announced a series of reductions in the reserve ratio of universal and commercial lenders. The rate will be reduced to 17% effective May 31, 16.5% effective June 28, and to 16% effective July 26.

Big banks are currently required to keep in reserve at least 18% of their deposits. The BSP has said that trimming big lenders’ reserve requirements by a percentage point will likely unleash about P90-100 billion into the financial system.

“We also saw strong participation in the auction. [We saw] 3 to 4 times oversubscription than what we have offered given that liquidity is very abundant,” Ms. De Leon added.

Sought for comment, Robinsons Bank Corp. trader Kevin S. Palma said good participation persisted during yesterday’s auction.

“A lot of investors may be putting liquidity to work ahead of a P13.5-billion T-bill maturity on May 22,” Mr. Palma said in a Viber message.

The government plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion in Treasury bonds.

SAMURAI BONDS
Meanwhile, Ms. De Leon said that the planned issuance of yen-denominated or samurai bonds is “still on the table” as the government calibrates its borrowing program.

“That’s still on the table. We just have to review the amount,” the National Treasurer said. “For now, based on our program, the only one overseas borrowing is the samurai (bonds) and we’ll have to calibrate the amount given that we have to see the whole fiscal status — the status of our fiscal program spending and revenues.”

Finance Secretary Carlos G. Dominguez III said on Friday that he will discuss with Ms. De Leon the country’s borrowing program for the rest of the year.

“Our expenditures really went down. Our deficit went down to 2.1%… It depends on what we need. If we find out that we can cover everything from the domestic market, we’d much rather do that,” the Finance chief told reporters last week.

The BTr previously said it is looking at offering samurai bonds amounting to $1-1.5 billion in yen equivalent next semester.

However, Ms. De Leon said yesterday that the Treasury is looking at a “benchmark-sized” issuance, with the timing still depending on market conditions and the cash position of the government.

BENCHMARK
“Yeah, always benchmark. $500-750 [million is the] benchmark equivalent to US,” she said. “Probably, we’re looking at [tenors of] three, five or seven, then 10. We are looking at three tenors right now.”

The government returned to the Japanese bond market in August last year, raising 154.2 billion in samurai bonds with tenors of three, five and 10 years.

The Philippines, one of Asia’s most active sovereign bond issuers, wants to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product.

Last week, the government raised 2.5 billion renminbi ($363.3 million) from its second sale of three-year yuan-denominated “panda” bonds, days after it issued €750-million worth of eight-year global bonds in Europe. — Karl Angelo N. Vidal

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