National Treasurer Rosalia De Leon.
MANILA – Rates of Philippine treasury bills (T-bills) went down across the board Monday, which National Treasurer Rosalia de Leon attributed to expectations for lower rates in the near term.
This followed hints of imminent rate cuts supposedly coming from officials of both the Federal Reserve and the Bangko Sentral ng Pilipinas (BSP). The Federal Open Market Committee (FOMC) will have its meeting on July 30-31 while BSP’s policy-making Monetary Board (MB) will have its rate setting meet on August 8.
Average rate of the bellwether 91-day paper went down to 3.769 percent from 3.883 percent during the auction last July 8.
The Bureau of the Treasury (BTr) offered this tenor for PHP4 billion and investors submitted PHP12.41 billion word of tenders. The auction committee made a full award.
Also, rate of the 182-day T-bill averaged at 4.100 percent from 4.238 percent in the previous auction.
The auction committee made a full award of PHP5 billion while tenders were more than five times at PHP25.66 billion.
The one-year paper fetched an average rate of 4.519 percent, lower than the 4.736 percent last July 8.
It was offered for PHP6 billion and fully awarded while bids were more than six times at PHP36.252 billion.
De Leon said members of the auction committee “are pleased with the results of the auction.”
She said banks, in a BTr survey done earlier, indicated that rates would move about five to 10 basis points actual increase are more than 10 basis points and the banks submitted almost the same level of rates.
“To they’re converging in terms of where the rates would be,” she said.
Aside from rate cut expectations another reason for the recent decline of government securities’ rates is the cut in banks’ reserve requirement ratio (RRR), which Bangko Sentral ng Pilipinas’ policy-making Monetary Board (MB) slashed by 200 basis.
The cuts were made as inflation continues to decline and to address “any tightness in domestic liquidity conditions due to limited public expenditure following the budget impasse in the first quarter of the year.”
The cuts were to be implemented in three tranches namely 100 basis points for universal and commercial banks (U/KBs), thrift banks’ (TBs) and non-bank financial institutions with quasi-banking function (NBQBs) effective May 31, 2019, and 50 basis points each by June 28, 2019 and July 26, 2018.
Demand deposits and negotiable order of withdrawal (NOW) accounts of rural and cooperative banks were, in turn, slashed by 100 basis points effective May 31, 2019.
Economists and authorities alike said a 100 basis points cut in banks’ RRR are expected to release about PHP90 billion into the domestic economy.
Meanwhile, De Leon said they will continue to issue foreign currency-denominated bonds in the coming years but this is only to be active in the capital markets overseas and not to surpass domestic borrowings.
He said foreign borrowings will only account for about 25 percent of the total and the priority would still be the official development assistance loans, which have lower interest rates. (PNA)
