THE Bureau of the Treasury (BTr) has awarded the full P20 billion on offer for three-year Treasury bonds (T-bonds) that were auctioned off on Tuesday as the market remains awash with cash.
National Treasurer Rosalia V. de Leon said the auction committee decided to award the full P20 billion on offer as the market is still flushed with liquidity because of the cut by the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) of banks’ reserve requirement ratio (RRR).
“We had a very healthy auction today given that [it’s] more than three times oversubscribed. We received offers of P65 billion. See also the decline in the rates given that last June 28 there was additional 50 basis points from the RRR [cut],” de Leon said. “And then, of course, given also that coming from the expectation that there will be another cut end of July [for] the other 50 basis points.”
The three-year T-bond bore a coupon rate of 4.750 percent, with bids amounting to P65.911 billion.
The average annual rate for the T-bond settled at 4.803 percent, which posted a decrease of 33.3 basis points from the previous auction rate for three-year T-bonds of 5.136 percent.
Secondary market rates under the Bloomberg Valuation Service (Bval) settled at 4.975 percent.
“The consensus on inflation for June would be about 2.9 [percent], 2.8 percent. So given all these considerations, the bids came in much lower than even the secondaries; and it’s about 33 basis points lower than the previous auction,” she added.
In May, the BSP’s MB moved to cut its deposit requirement on smaller banks in the system, after earlier cutting the rates for the universal and commercial banks’ RRR.
Monetary authorities decided to cut the RRR of thrift banks by two-percentage points from 8 percent to 6 percent.
The implementation dates for the reduction are as follows: 100 basis points effective May 31; 50 basis points effective June 28; and 50 basis points effective July 26, 2019.
The MB also cut the RRR of the universal and commercial banks by a total of two percentage points, as per implementation dates, about P95 billion will be released by end-May; about P47 billion by end-June 28; and another P47 billion by end-July.
Meanwhile, in terms of the samurai bond issuance for this year, de Leon explained that Japanese investors were bullish on the growth story of the country as depicted during the non-deal road show held by BTr officials in Japan last week, but the timing of the issuance will still depend on market conditions.
“We had the non-deal road show last week. So we also saw strong appetite of Japanese investors for the issue. In terms of the schedule, we still have to do several [things], like market sounding,” she said. “The consideration is when you reach the second half of August, that would already be the ghost period, so the investors would be out on vacation already; so we also make sure [for a] clear market for our own issuance.”