THE GOVERNMENT made a full award of the Treasury bills (T-bill) it offered yesterday, with rates dropping across all tenors amid strong demand following the central bank’s reserve requirement ratio (RRR) cuts and bets of monetary policy easing at home and in the US.

The Bureau of the Treasury (BTr) fully awarded P15 billion worth of T-bills yesterday as the offer was almost five times oversubscribed as tenders received amounted to P74.32 billion.

Broken down, the government borrowed P4 billion as programmed via the 91-day tenor as bids amounted to P12.41 billion. The average rate plunged 11.4 basis points (bp) to 3.769% from the 3.883% logged in the previous auction.

The Treasury also made full award of the 182-day papers, accepting P5 billion as planned out of bids worth P25.66 billion. The average yield also declined 13.8 bps to 4.1% from last week’s 4.238%.

For the 364-day T-bills, the Treasury fully awarded the programmed P6 billion, with tenders amounting to P36.252 billion. The one-year tenor’s average rate declined 21.7 bps to 4.519% from the 4.736% logged a week ago.

At the secondary market yesterday, the three-month, six-month and one-year T-bills were quoted at 4.111%, 4.308% and 4.763%, respectively, based on the based on the PHP Bloomberg Valuation Service Reference Rates.

National Treasurer Rosalia V. De Leon said there was strong demand from banks ahead of the implementation of the last phase of cuts to banks’ RRR and market expectations of monetary policy easing by the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

“First, end of July, we’ll see again a 50-bp cut in terms of the RRR, and then of course there’s also both the BSP Governor and also following the statements made by the Fed that there are chances there would be…policy easing,” Ms. De Leon told reporters after the auction.

“The FOMC (Federal Open Market Committee) FOMC will meet end of this month, then it would be like a 25-50 bps cut in the policy rate. So there’s really a convergence in terms of first, the reduction in the interest rate and second, also again stronger liquidity that we’ll be seeing in the market,” Ms. De Leon said.

After a 100-basis point RRR cut across all banks last 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 will be implemented on July 26 to finally bring the RRR of big banks to 16% and thrift banks to 6%, which completes the phased cuts the BSP announced in May.

Meanwhile, Fed chair Jerome Powell previously hinted on a cut in benchmark rates, saying the central bank will “act as appropriate” to sustain growth amid “crosscurrents.”

The BSP is also expected to cut interest rates when the policy-making Monetary Board convenes again next month. BSP Governor Benjamin E. Diokno earlier said the regulator is likely to cut policy rates in the second half before moving to reduce banks’ reserve requirement ratio.

Last week, Mr. Diokno said a possible 25-bp or 50-bp rate cut from the Fed gives the BSP “and the entire world more policy space for cutting.”

Sought for comment, Robinsons Bank Corp. peso debt trader Kevin S. Palma said, “The market continued with its bullish ways as dealers and investors put liquidity to work and lock-in yields ahead of the Fed decision.”

“Reinvestment activities were also evident due to some P16 billion T-bills maturing on Thursday,” he added.

SAMURAI BONDS
Meanwhile, Ms. De Leon said the government expects to get the necessary approvals for its planned issuance of yen-denominated or samurai bonds before the end of the month or in early August.

“Mayroon lang mga (There are) approvals we have to secure, yung parang (such as) preliminary requirements that we also have to comply with… It could be next week or before the start of the ghost month,” she said.

She said the Treasury is not planning any other offshore bond offerings besides what it has issued previously as the government also has to prioritize the utilization of official development assistance (ODA).

“We are limiting the external borrowings to 25% for next year. Also we have to be mindful that we have to put access to ODAs. So given the concession of financing, so we’d like to get first the ODAs out of the door before we resort to other external commercial borrowings,” Ms. De Leon said.

“The menu would be the same: the dollar, the euro, the samurai and the panda.”

The official added that the government has no plans to issue more retail Treasury bonds following the “jumbo issuance” from recent auctions.

“We have to again see the pace of the utilization of all the funds right now, given the catch-up plan,” Ms. De Leon said.

The government operated on a re-enacted 2018 budget from the start of the year until April 15, when President Rodrigo R. Duterte signed the latest general appropriations into law, but vetoed P95.3 billion in appropriations that he said were not in accordance with his administration’s priorities, slashing this year’s national budget to about P3.662 trillion.

The delay in the budget’s enactment was largely blamed by economic managers for the slowdown in the country’s gross domestic product growth in the first quarter to 5.6% — its worst performance in four years.

In May, the government’s Economic Development Cluster mapped out a strategy to catch up on growth following the disappointing first-quarter print.

The government plans to borrow P230 billion from the domestic market this quarter, broken down into P90 billion in T-bills and P140 billion in Treasury bonds. — R.J.N. Ignacio