THE GOVERNMENT made a full award of the Treasury bills (T-bill) it offered yesterday, with rates dropping across all tenors on the back of strong liquidity and following the US Federal Reserve’s rate cut, as well as bets of monetary policy easing by the local central bank.

The Bureau of the Treasury (BTr) fully awarded P15 billion worth of T-bills yesterday as the offer was almost six times oversubscribed, with total tenders amounting to P87.1 billion.

Broken down, the government raised P4 billion as planned via the 91-day T-bill, with tenders reaching P13.352 billion. The tenor’s average rate dropped to 3.398% yesterday, 37.1 basis points (bp) lower than the 3.769% fetched during the July 22 offering.

The Treasury also made full award of the 182-day papers, accepting P5 billion as programmed out of bids worth P27.629 billion. The average yield declined 42.3 bps to 3.677% from the previous offer’s 4.1%.

For the 364-day T-bills, the Treasury fully awarded the programmed P6 billion, with tenders amounting to P46.149 billion. The one-year tenor’s average rate declined 62.1 bps to 3.898% from the 4.519% logged during the previous T-bill offering.

At the secondary market yesterday, the three-month, six-month and one-year T-bills were quoted at 3.753%, 3.917% and 4.143%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

Following the auction, National Treasurer Rosalia V. De Leon said investors parked their funds in the Treasury bills following the US central bank’s move to cut its benchmark rates and bets of easing at home and in other markets moving forward, as well as the implementation of the last tranche of the Bangko Sentral ng Pilipinas’ (BSP) phased cuts to banks’ reserve requirement ratios (RRR).

“On terms of the rates, obviously, because…coming from the FOMC (Federal Open Market Committee) meeting…the insurance rate cut given by [US Federal Reserve Chair Jerome] Powell during the last Fed meeting. And there’s also a lot of Asian central banks…on the road to easing,” Ms. De Leon told reporters.

“And there’s also the high probability…that the market is also pricing in a 25-bp cut by the central bank when they meet on August 8 for the MB (Monetary Board) policy meeting,” she added.

As widely expected by the market, the Fed decided to trim its policy rates by 25 basis points at its meeting last week, its first cut in a decade.

However, Mr. Powell said in a news conference following the meeting that the US central bank had no plans of adjusting rates further, as the latest cut was only done to adjust to economic conditions.

Meanwhile, market watchers said in a BusinessWorld poll last week that the BSP will likely trim its policy rates this week, with 16 respondents expecting a 25-bp rate cut when the policy-setting MB meets on Thursday for its fifth review this year.

“[As for the effect of the RRR cuts], I think [it affected the results], but there is also a good pipeline…of bank bonds and corporates that would be…issuing in the domestic market…. That’s why they are opting to use the Treasury bills as a parking lot in the meantime for those excess funds that they also have to deploy eventually,” Ms. De Leon said.

After a 100-bp RRR cut across all banks on May 31, the BSP trimmed the reserve ratios of universal and commercial lenders and thrift banks by another 50 bps last June 28 to 16.5% and 6.5%, respectively.

Another 50-bp reduction was implemented last July 26, bringing the reserve quotas of big banks to 16% and thrift banks to 6% and completing the phased cuts the BSP announced in May.

OFFSHORE BORROWINGS DONE
Meanwhile, Ms. De Leon said the samurai bonds issued last week will likely be its last offshore offering for this year on the back of the government’s positive revenue collection performance.

“For the offshore, based on the program, the samurai bonds will be the last that we are doing for 2019… For now we are not thinking of any pre-funding during the last quarter of the year. Pre-funding in terms of offshore borrowings,” she said.

The government last week raised ¥92 billion ($860 million or P44.3 billion) from the sale of samurai or yen-denominated bonds across four tenors, amid strong demand from investors.

Ms. De Leon earlier said the government saw strong demand for the samurai bonds, prompting the Treasury to upsize the offer from the $750 million it announced previously.

The government is set to borrow P230 billion from the domestic market this quarter through T-bills and Treasury bonds.

It is looking 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 gross domestic product. — BML

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