MANILA – The rates of Philippine Treasury bills (T-bills) posted record drops of more than 40 basis points Monday, which National Treasurer Rosalia De Leon attributed to the market's expectations of cuts in central bank rates here and abroad.
Average rate of the 92-day paper, a day longer like the other two tenors due to a holiday, fell by 43.7 basis points to 4.555 percent from 4.992 percent during the auction last June 3.
Rate of the three-month paper in the secondary market after the Monday morning session was higher at 5.042 percent.
The Bureau of the Treasury (BTr) offered this paper for PHP4 billion and banks submitted PHP7.8-billion worth of tenders. The auction committee made a full award.
Rate of the 183-day T-bill averaged at 4.923 percent, 47.7 basis points lower than the previous auction’s 5.400 percent. Average rate in the secondary market in the morning session Monday is higher at 5.345 percent.
It was fully awarded at PHP5 billion while tenders reached PHP20.132 billion.
Also, average rate of the 365-day T-bill declined by 42.90 basis points to 5.069 percent, lower than week-ago’s 5.498 percent and the secondary market rate’s 5.457 percent.
BTr offered this tenor for PHP6 billion and the auction committee made a full award. Banks submitted PHP25.655 billion worth of tenders.
De Leon expects this trend in rates and volume to continue in the coming weeks given investors’ risk aversion overseas due to trade tensions.
On the local front, she explained that amid the uptick of domestic inflation rate last May to 3.2 percent from the previous month’s three percent Bangko Sentral ng Pilipinas (BSP) officials maintain that inflation this year is expected to stay within the government’s two to four percent target.
She also attributed to the cut in banks’ reserve requirement ratio (RRR) the large volume of bids during the auction.
The BSP’s policy making-Monetary Board (MB) recently cut banks’ RRR due in part to the central bank’s bid to make monetary policy more market-based.
The Board cut universal and commercial banks’ (U/KB) and thrift banks’ (TBs) RRR by a total of 200 basis points, to be implemented on staggered basis.
Specifically, the cuts will be 100 basis points effective May 31, 2019 and 50 basis points each on June 28 and July 26, 2019.
RRR of rural and cooperative banks were cut by 100 bps, from 5 percent to 4 percent, effective 31 May 2019.
The reductions are expected to release at least PHP200 billion into the system. (PNA)
