THE GOVERNMENT raised P20 billion as planned via the reissued 20-year Treasury bonds (T-bond) on offer yesterday, as its average yield plunged to two-year lows as participants continued to price in the reduction in lenders’ reserve requirement ratios (RRR) and a possible rate cut from the central bank.

The Bureau of the Treasury fully awarded the 20-year bonds it auctioned off on Tuesday as it received bids totalling P27.292 billion, more than the amount it wanted to raise.

The 20-year debt notes, which carry a coupon rate of 6.75% and have a remaining life of 19 years and seven months, fetched an average rate of 5.17% yesterday, 154.6 basis points (bp) lower than the 6.716% recorded when the bonds were last offered in January.

The average rate was also the lowest for the 20-year tenor in two years or since it fetched 5.035% last June 2017.

At the secondary market, the 20-year IOUs were quoted at 5.241% yesterday, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Following the auction, Deputy Treasurer Erwin D. Sta. Ana said the BTr saw “very good” results yesterday as the rate on the bonds plunged.

“It just shows the trend (is heading towards) declining interest rates,” Mr. Sta. Ana said.

“As already mentioned by the Treasurer, the factors (include) the RRR cut, the possible rate cut from the BSP (Bangko Sentral ng Pilipinas),” he added.

The central bank last month slashed the RRR of lenders by a percentage point effective May 31 to 17% for universal and commercial banks, 7% for thrift banks, and 4% for rural and cooperative banks.

The BSP earlier estimated that a percentage point cut in big banks’ RRR released P90-100 billion into the financial system, while another P22 billion was seen unleashed due to a 100-bp reduction in reserve requirements for smaller lenders.

Meanwhile, BSP Governor Benjamin E. Diokno earlier said the central bank “has more room” for monetary easing, and that it is a question of when and not if.

Mr. Sta. Ana said another factor considered by investors yesterday was the movement of US Treasuries.

Yields on US debt papers have been declining recently as market players flocked to other instruments due to the simmering trade tensions between the US and countries such as China and Mexico.

“The market continued to track US Treasury yields which saw a mild correction week-on-week as trade concerns eased after the US and Mexico reached an agreement,” Robinsons Bank Corp. peso debt trader Kevin S. Palma said in a phone message.

US President Donald J. Trump decided to cancel an earlier plan to impose a five percent tax on all Mexican imports over the weekend as part of its bilateral deal with Mexico on immigration.

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

It is looking to raise some 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. — Karl Angelo N. Vidal

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