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Gov’t makes full award of T-bills as yields decline on BSP rate cut

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Bureau of the Treasury (BoT)

THE GOVERNMENT borrowed P15 billion as planned at its Treasury bills (T-bill) auction yesterday, with yields declining across all tenors following the policy rate cut of the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury (BTr) made a full award of the debt notes it auctioned off on Tuesday as bids offered by banks surged to P54.6 billion, more than thrice the amount the Treasury wanted to borrow.

Broken down, the government borrowed P4 billion as programmed via the 91-day tenor yesterday as bids amounted to P19.85 billion. The average rate declined 4.9 basis points (bp) to 5.389% from the 5.438% logged in the previous auction.

The Treasury also made a full award of the 182-day T-bills as it accepted P5 billion as planned out of offers totalling P15.778 billion. The average yield slipped 5.7 bps to 5.768% from last week’s 5.825%.

For the 364-day T-bills, the government borrowed the programmed P6 billion out of the P19.01 billion tendered by banks. Its average yield likewise slid 4.1 bps to 5.936% from the 5.977% quoted in the previous offering.

Based on the PHP Bloomberg Valuation Service Reference Rates, the three-month, six-month and one-year papers were quoted at 5.572%, 5.841% and 5.994% yesterday, respectively.




Following the auction, Deputy Treasurer Erwin D. Sta. Ana said the Treasury saw a good turnout, citing the robust demand and lower rates seen at the fund-raising exercise.

“That’s in line with the market feedback that we got prior to the auction. They are anticipating about five to 10 basis points lower,” Mr. Sta. Ana told reporters yesterday.

He added that the decline in yields across the board was “primarily driven by the rate cut last week and possible RRR (reserve requirement ratio) cut as the BSP Governor [Benjamin E. Diokno] has alluded in the past couple of days.”

The central bank last week trimmed benchmark interest rates by 25 bps to a 4-5% range, citing the “manageable” inflation outlook on the back of a decline in food prices amid improved supply conditions.

Headline inflation continued to ease for the sixth straight month in April to 3%, slower than the 3.3% recorded in March and beating market consensus.

Sought for comment, Robinsons Bank Corp. peso sovereign debt trader Kevin S. Palma said the auction result yesterday was within expectations, as the BSP’s policy rate cut caused yields to reprice lower from the previous T-bills auction.

“The auction had a strong turnout as the market is still anticipating a cut in banks’ reserve requirement when the Monetary Board meets this Thursday,” Mr. Palma said in a mobile phone message.

The central bank made no reduction in the reserve ratio last week, although the BSP chief said it will be “on the agenda” of the Monetary Board’s meeting this week.

Currently, universal and commercial banks are required to keep at least 18% of their total deposits with the BSP.

Trimming the RRR is expected to unleash about P90 billion in liquidity into the financial system, which can used for loans or investments.

“Icing on the cake was the reinvestment demand from a P13-billion T-bill maturity on May 15,” Mr. Palma added.

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