THE GOVERNMENT made a full award of the reissued 20-year Treasury bonds (T-bond) it offered yesterday amid healthy demand as market participants await the policy decision of the local and US central banks.
The Bureau of the Treasury (BTr) raised P20 billion as planned from its T-bond offer yesterday after receiving bids totalling P29.814 billion.
The 20-year papers, which carry a coupon rate of 6.75%, fetched an average rate of 5.015%, 15.5 basis points (bp) lower than the 5.17% average fetched when the debt papers were last offered on June 11. The bonds have a remaining life of 19 years and six months.
Market players asked for returns ranging from 4.98% to 5.05% yesterday.
At the secondary market yesterday, the 20-year bonds fetched 5.022%.
National Treasurer Rosalia V. De Leon said the Treasury continued to see “very good and healthy” results during the auction as it saw strong demand from investors.
“We have strong demand for the long end of the curve, recognizing that first, the liquidity, and also the anticipation of the cut coming from the FOMC (Federal Open Market Committee) meeting,” Ms. De Leon told reporters yesterday.
The Bangko Sentral ng Pilipinas (BSP) completed its phased reduction of banks’ reserve requirement ratios last Friday, bringing it down to 16% for universal and commercial banks and six percent for thrift lenders, unleashing billions of pesos into the financial system.
Meanwhile, the US Federal Reserve is widely expected to trim rates when its policymaking FOMC meets on July 30-31. Economists see this as a move to counter headwinds brought by trade tensions as well as the slowing global growth.
Ms. De Leon added that market participants also factored in the earlier statements of BSP Governor Benjamin E. Diokno.
“Also, (market players also looked into) the earlier pronouncements of Governor Diokno about the cut in the policy rate that it would still be on the table. But of course, it’s still data dependent. They will continue to be patient as well,” she added.
Earlier, Mr. Diokno expressed commitment to cutting benchmark rates amid expectations of a rate cut from the Fed. “Even before the position of the Fed, we are already committed to cutting,” the central bank chief said last July 12. “So that’s an additional input to our decision.”
Sought for comment, Robinsons Bank Corp. peso debt trader Kevin S. Palma said the auction result was within expectations.
“The market awaits the FOMC decision this Thursday, where the Fed is widely expected to cut by 25 basis points,” Mr. Palma said.
The government is set to borrow P230 billion from the domestic market this quarter through Treasury bills and T-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. — Karl Angelo N. Vidal