Reduction in reserve requirement boosts demand for Retail TBs

MANILA, Philippines — The recent move of the Bangko Sentral ng Pilipinas (BSP) to cut the reserve requirement of banks has led to the robust demand for the Bureau of the Treasury’s (BTr) Retail Treasury Bonds (RTBs), according to the Department of Finance (DOF).

In the first day of its offer period for the 21st tranche of RTBs, the BTr has already raised P92.79 billion in total bids, more than thrice the original volume size of P30 billion.

But only P66 billion has so far been awarded by the BTr after it set the coupon rate for the three-year securities at 4.875 percent.

Finance Secretary Carlos Dominguez said the robust demand for the securities could be attributed to the ample liquidity in the financial system following the reduction of the reserve requirement ratio of banks to 18 percent from 19 percent.

“Our assessment is, remember that the central bank has lowered the reserve requirement by another percentage point, so that’s P80 billion. At least that money is going to look for a home, so they can use that money to buy bonds,” Dominguez said when asked to comment on the results of the price-setting auction.

Despite the healthy demand, the finance chief assured the Philippine government is not going to borrow more than what is programmed.

Dominguez said the volume to be accepted by the BTr for its ongoing RTB issuance would not be dependent on the demand for the securities, but rather on the financing needs of the government.

“We will follow what our borrowing plan is. It’s not demand driven, it’s what we need. We are not going to over borrow,” Dominguez assured.

The general investing public can participate in the RTB offering until June 9.

Earlier, National Treasurer Rosalia De Leon said the volume of accepted offers for this tranche of RTB sale would probably be lower than the P255 billion raised during the previous RTB issuance in November last year.

She said revenue-generating agencies, namely the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), have been performing well in the past five months, securing a good financial position for the government.

The national treasurer said proceeds from the RTB sale would be used to finance the projected fiscal deficit for the year and compensate for the past rejections made by the BTr during the course of the year.    

RTBs form part of the Philippine government’s funding program. Aside from this, the Philippine government is also eyeing to issue US-denominated global bonds and samurai bonds or yen-denominated securities this year.

For 2018, the national government is also programmed to borrow P889.51 billion from local and foreign lenders.