Rates lower for reissued 3-year T-bonds
Mary Grace Padin (The Philippine Star) - December 11, 2019 - 12:00am

MANILA, Philippines — Reissued three-year Treasury bonds (T-bonds) fetched lower rates yesterday amid healthy demand due to the ample liquidity in the financial system, the Bureau of the Treasury (BTr) said.

During the last auction of the year held yesterday, government securities with a remaining life span of two years and six months fetched an average rate of 3.742 percent , 25.4 basis points lower than the 3.996 percent recorded in the previous auction last Oct. 1.

This was likewise lower than the secondary market rate for the same tenor, which settled at 3.928 percent before the auction closed in the afternoon.

The auction was almost three times oversubscribed, with total tenders amounting to P59.666 billion.

“(It’s) nice to end the 2019 auction on a high note--lower rates, with close to three times of oversubscription,” National Treasurer Rosalia de Leon told reporters after the auction.

De Leon said the securities were able to secure high demand and lower rates following the Bangko Sentral ng Pilipinas’ move to cut banks’ reserve ratio requirements (RRR) this December, which unleashed about P100 billion in additional liquidity into the financial system.

She said the demand was also driven by the market’s expectations of further monetary policy easing, following BSP Governor Benjamin Diokno’s pronouncements that the central bank is not yet closing its doors for another rate cut this year. The Monetary Board is set to meet on Dec. 12.

“And they (investors) are already trying to finish the year in terms of placements,” De Leon said.

The central bank has slashed interest rates thrice this year with a cumulative reduction of 75 basis points, partially unwinding a tightening cycle that saw benchmark rates increase by 175 basis points last year.

The regulator also approved the reduction of the RRR for big and mid-sized banks by 100 basis points effective this month, bringing the total cut to 400 basis points for big and mid-sized banks, and 200 basis points for small banks.

Due to the healthy demand during the auction, De Leon said the BTr has decided to open the tap facility to allow the government to absorb P20 billion more in tenders.

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