THE GOVERNMENT made a full award of the reissued three-year Treasury bonds (T-bonds) it placed on the auction block on Tuesday as rates declined amid strong liquidity.

The Bureau of the Treasury (BTr) raised P20 billion as planned via the reissued papers. The tenor attracted bids worth P59.666 billion which was nearly three times the initial offer.

The three-year bonds fetched an average rate of 3.742%, 25.4 basis points (bps) lower compared to the 3.996% logged in the previous auction on Aug. 27.

The committee decided to open the tap facility for another P20-billion offer to accommodate the remaining demand.

At the secondary market yesterday, the three-year papers fetched a rate of 3.928%, according to PHP Bloomberg Valuation Service Reference Rates.

National Treasurer Rosalia V. de Leon said the auction ended “on a high note” as the last offering for the year was met with oversubscription and yielded lower rates.

Ms. De Leon said the demand was healthy due to the additional liquidity provided by the reserve requirement ratio (RRR) cut that took effect this month as well as the market looking to park their funds to end the year.

Nung (In) December additional liquidity was unleashed — the (RRR) cut — that’s close to P100 billion. And then also they’re trying to already finish the year in terms of placements. And it’s a good rate kasi di ba ang (because its) coupon niya ay (is) four (percent) something eh so they’re getting a good rate for this 3-24,” she told reporters.

The RRR for universal and commercial lenders now stands at 14% and four percent for thrift banks following the Bangko Sentral ng Pilipinas’ (BSP) 400 bps worth of cuts for the year thus far, while the reserve ratio of nonbank financial institutions with quasi-banking functions is at 14%. Meanwhile, the RRR of rural banks is at three percent.

A bond trader interviewed after the auction said the rates fetched by the bonds fell slightly below market expectations “due to strong market liquidity and also the continued demand in the short tenor.”

The trader also said the BTr’s move to open the tap facility was expected to “take advantage” of the strong market liquidity as yesterday’s auction was the last one for the year.

The trader added that the market is also waiting for the next policy-setting meeting of the BSP Monetary Board on Thursday, Dec. 12, to see if they will implement another cut in benchmark interest rates.

BSP Governor Benjamin E. Diokno earlier said they will consider the latest inflation data in their upcoming meeting to decide on its policy stance.

Headline inflation picked up to 1.3% in November from 0.8% in the previous month. This brought the year-to-date average to 2.5%, which is within the 2-4% target band set by the central bank for 2019.

The government 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. — Beatrice M. Laforga