TENDERS for the Treasury bills (T-bills) were almost six times oversubscribed at P87.1 billion as investors expect the local Central Bank to take cue on Thursday after US monetary authorities signaled a rate cut.
National Treasurer Rosalia V. de Leon said the auction committee was swamped with bids for the 91-, 182-, and 364-day T-bills. The Bureau of the Treasury (BTr) has awarded the full P15 billion on offer on Monday’s T-bills auction.
“We were swarmed by offers not only in terms of the volume but also in terms of how deep the rates are given from the average of about 50 basis points; even looking at the one year at 62 basis points lower than the previous auction,” de Leon said.
The 91-day T-bill was awarded the full P4 billion on offer, with tenders for the security amounting to P13.352 billion.
The average annual rate settled at 3.398 percent, posting a 37.10-basis-point decline from the 3.769 percent recorded in the previous auction.
Bids for the 182-day T-bill amounted to P27.629 billion with the auction committee awarding the full P5 billion on offer. The average annual rate settled at 3.677 percent, which posted a decrease of 42.30 basis points from the previous auction rate of 4.10 percent.
Confluence of events
DE Leon explained that the massive volume of offers for the government security was due to cuts in the reserve requirement ratio (RRR) of banks.
“The last tranche of the RRR cut last month, that’s another 50 basis points. And then the previous months we’ve also seen 100 basis points and 50 basis points in June.” The more obvious reason for finding T-bills more attractive is the rate-cut by US and Asian monetary officials, according to de Leon.
“In terms of the rates, obviously, because coming from the FOMC [Federal Open Market Committee] meeting…the insurance rate cut given by [Federal Reserve System Chairman Jerome] Powell during the last Fed meeting. And there’s also a lot of Asian central banks on the road to easing.”
De Leon surmised “there’s also the high probability that the market is also pricing at a 25-basis-point cut by the Central Bank when they meet on August 8 for the Monetary Board policy meeting,” she said.
The 364-day T-bill was awarded P6 billion by the auction committee as tenders for the security amounted to P46.149 billion.
The average annual rate for the security settled at 3.898 percent, which showed a decrease of 62.10 basis points from the previous auction rate of 4.519 percent.
According to de Leon, these are the “confluence of reasons [investors] are now just parking the funds with the T-bills.”
“There is also a good pipeline eventually of bank bonds and corporates that would be issuing in the domestic market. That’s why they are opting to use the T-bills as a parking lot, in the meantime, for those excess funds that they also have to deploy eventually,” she added.
Samurai bond
MEANWHILE, the samurai bond issuance of the Philippine government was triggered last week wherein the country was able to raise ¥92 billion or around $850 million bearing four tenor buckets: three, five, seven and 10 years.
The coupon rate for the three-year tenor settled at 0.10 percent, the five-year tenor with 0.28 percent, the seven-year bond at 0.43 percent and the 10-year maturity at a coupon rate of 0.59 percent.
De Leon earlier said the BTr is eyeing an initial $750 million equivalent to yen issuance for the samurai bond but decided to increase the offer to around $850 million seeing the tightness in spreads from the investors.
De Leon said this was “to show our appreciation to the investors because they also lowered in terms of the spreads over the benchmark.”
She said the samurai bond is the last offshore bond issuance this year based on the government’s offshore borrowing program for 2019.
“For now we are not thinking of any prefunding, in terms of offshore borrowings, during the last quarter of the year,” de Leon added.