3-year T-bonds fetch lower rates

MANILA, Philippines — Newly issued three-year Treasury bonds (T-bonds) fetched lower rates yesterday amid the continued reduction in banks’ reserve requirement ratio (RRR) and expectations of slowing inflation, the Bureau of the Treasury (BTr) said.

During yesterday’s auction, fresh three-year securities fetched an average rate of 4.803 percent, 33.3 basis points lower than the 5.136 percent rate recorded in its previous auction in August last year.

The debt papers were also priced at a coupon rate of 4.75 percent, lower than the previous average rate, as well as the Bloomberg valuation rate which settled at 4.975 percent the afternoon before the auction closed.

The P20 billion offering was more than thrice oversubscribed with total tenders amounting to P65.911 billion.

“We had a very healthy auction today given that (it’s) more than three times oversubscribed. We received offers of P65 billion,” National Treasurer Rosalia de Leon told reporters after the auction.

According to De Leon, the decline in rates may be attributed to the further reduction in banks’ reserve ratio requirement, as well as market’s anticipation of declining inflation.

“(We) see the decline in rates given that last June 28, there was an additional 50 basis point in reserve requirement cut. (It’s) coming also from the expectation that there will be another cut by end of July, the other 50 basis points, and of course, the consensus on inflation for June would be about 2.9, 2.8 percent,” De Leon said.

The Bangko Sentral ng Pilipinas (BSP) decided to implement a reduction in the RRR for universal and commercial banks in three stages, starting with 100 basis points effective May 31, followed by 50 basis points on June 28, and another 50 basis points on July 26. This would bring the RRR level to 16 percent from the current 18 percent.

The central bank last week likewise cut the RRR for thrift and mid-sized banks to six percent from the current level of eight percent in three tranches similar to the schedule for universal and commercial or big banks.

Meanwhile, the national treasurer said the BTr saw strong demand for the government’s upcoming samurai-bond issuance during a recently concluded non-deal roadshow in Tokyo. 

“They (Japanese investors) are very bullish on the Philippines, coming from the S&P upgrade, obviously, and they would also see the liquidity in the market because it we are going to do more frequent issuances, then we can also be in the index for samurai bonds,” she said.

However, De Leon said the Treasury has yet to determine and finalize the timing and tenor of the issuance. 

De Leon said the government still has to complete the registration for the issuance and do market sounding activities before it pushes through with the fund raising activity.