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T-bill yields decline on strong demand

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By Karl Angelo N. Vidal, Reporter

THE GOVERNMENT made a full award of the Treasury bills (T-bill) it placed on the auction block yesterday, as market participants await the results of US central bank’s policy meeting this week.

The Bureau of the Treasury (BTr) on Monday raised P15 billion as planned via T-bills auction, with the offer fetching bids totalling P43.1 billion, nearly thrice the amount the government wanted to borrow.

Broken down, the government made a full award of the 91-day debt papers, borrowing P4 billion as planned versus total offers amounting to 7.45 billion. The average yield declined by 10.2 basis points (bp) to 4.453% from the 4.555% fetched in the previous auction.

The Treasury also awarded P5 billion as planned for the 182-day IOUs out of the P17.88 billion offered by banks and other financial institutions. The average rate slipped 6.7 bps to 4.856% from last week’s 4.923%.

The BTr likewise fully awarded the 364-day T-bills, accepting P6 billion out of total tenders worth P17.734 billion. Its average yield slid 1.9 bps to 5.05% from the 5.069% tallied in the previous auction.

At the secondary market yesterday, the rates on the three-month, six-month and one-year T-bills were at 4.605%, 4.928% and 5.101%, respectively.

National Treasurer Rosalia V. De Leon said the Treasury saw strong market participation yesterday given the “very liquid” position of investors.

“For this month, (the market is waiting for) another 50 bps cut in the RRR (reserve requirement ratio),” Ms. De Leon said yesterday.

Effective June 28, the Bangko Sentral ng Pilipinas (BSP) will trim universal and commercial banks’ RRR by 50 bps to 16.5%. It will also implement a similar cut in thrift banks’ reserve ratio to bring it down to 6.5%.

Another 50-bp cut will be implemented next month to bring down the reserve ratios of big banks and thrift lenders to 16% and 6%, respectively.

The BSP already slashed lenders’ reserve ratios by a percentage point effective May 31 to 17% for universal and commercial banks, 7% for thrift banks, and 4% for rural and cooperative banks, unleashing billions of pesos into the financial system.

“We’re also waiting for the results of the FOMC (Federal Open Market Committee) meeting starting tomorrow,” Ms. De Leon said on Monday.

The US Federal Reserve’s policy-making FOMC is expected to keep benchmark rates steady during its June 18-19 meeting, although the US central bank is still seen to trim its interest rates sometime this year.

“The expectation is that the Fed will maintain but there’s also the high likelihood in the next policy meeting that they might go for a (cut),” Ms. De Leon added.

Sought for comment, Robinsons Bank Corp. trader Kevin S. Palma said market players continued to put their extra cash in the T-bills, as seen in the demand for the debt papers.

“Investors continued to park their funds in short-term papers amid prospects of monetary policy easing both by the Fed and the BSP within the year,” Mr. Palma said in a text message yesterday.

The BSP will also meet to review its policy settings this Thursday. Six out of 10 economists polled by BusinessWorld said the central bank will likely keep rates steady, while the rest see another 25-bp cut in benchmark yields.

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.

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 the country’s gross domestic product.





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