Tap option looking to trend

The Bureau of the Treasury (BTr) is using the tap option to soak on excess liquidity in the financial system created partly by the series of cuts in the banks’ deposit reserves.

This was the assessment ING Bank senior economist Nicholas Mapa bared Wednesday as Treasury officials again activated the facility on Wednesday.

“The blistering pace of spending has activated the erstwhile dormant BTr, who has now activated the tap facility in two consecutive bond offerings to secure funding at relatively lower rates,” Mapa said.

“We expect the BTr to resume this tap heavy behavior all the more with (National) Treasurer (Rosalia) De Leon indicating she would like to soak up liquidity from the market as the Bangko Sentral ng Pilipinas reduces (the banks’) reserve requirement ratio,” he said.

According to him, the deliberate acceleration in government spending will likely be sustained towards 2020 as government operations embrace cash-based budgeting.

Earlier, the BTr reported significant growth in disbursement, which surged 38 percent in September and a reflection of the catch-up effort the economic planners adopted in recent months.

That the activation of the tap could prove a trend down the line is entirely possible should the market and the interest rate they dictate remain within the realm of the reasonable.

“Could be, particularly if the rates offered are good,” De Leon said in a text message.

He also said lackluster bank lending growth may be owed to investor preference to wait for still lower interest rates.

“Analysts have pointed to the dovish governor and his dovish pronouncements throughout as the reason for sluggish lending growth rates as chief financial officers simply sign up for working capital but direct ambitious investment plans to the backburner as they wait for rates to hit rock bottom,” Mapa explained.