By Aaron Michael C. Sy, Reporter
THE GOVERNMENT fully awarded Treasury bonds (T-bonds) at an auction on Tuesday, at an average rate within market expectations as investors reacted to the Bangko Sentral ng Pilipinas’ (BSP) announcement of further cutting banks’ reserve requirement ratios (RRR).
The Bureau of the Treasury (BTr) raised P25 billion as planned via the reissued bonds as total bids reached P39.06 billion, higher than the amount on offer. This brought the outstanding volume for the bond series to P167.7 billion, it said in a statement.
The reissued 20-year bonds, which have a remaining life of 19 years and three months, were awarded at an average rate of 6.376%. Accepted bid yields were 6.3% to 6.4%.
The average rate of the reissued paper rose by 28.1 basis points (bps) from 6.095% fetched for the series’ last award on Nov. 12, but was 49.9 bps lower than the 6.875% coupon for the issue.
This was likewise 0.7 bp above the 6.369% quoted for the 20-year bond and 4.2 bps higher than 6.334% for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
“Decent demand was observed, with yields within expected range,” a trader said in a text message. “It looks like demand came from end-users looking to lock-in yields.”
Another trader said by telephone the average rate was at the lower end of expectations, but there was still decent demand for the notes due to the RRR cut announcement. The reserve ratio is the portion of reserves that banks must hold onto rather than lending these out.
Last week, the central bank said it would reduce the ratio for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 bps to 5% effective March 28.
The RRR for digital banks will be cut by 150 bps to 2.5%, while that for thrift banks will fall by 100 bps to 0%.
Rural and cooperative banks’ RRR has been at 0% since October, which was the last time the BSP cut lenders’ reserve ratios.
“The BSP reiterates its long-running goal of enabling banks to channel their funds more effectively toward productive loans and investments,” the BSP said. “Reducing RRRs will lessen frictions that hinder financial intermediation.”
Tuesday’s T-bond auction was the last for the month. The BTr raised P125 billion in February as it fully awarded all auctions and opened one tap facility.
The BTr raised P218.6 billion from its borrowing program during the month, higher than the P203-billion plan.
For March, the Treasury may raise P147 billion from the domestic market — P22 billion from Treasury bills (T-bills) and P125 billion from T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year.
