THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday even as its average rate inched up from the previous auction, with the recent issuance of 10-year benchmark notes affecting market liquidity and investor demand.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued seven-year bonds it auctioned off as total bids reached P55.222 billion or nearly twice the amount on offer.
This brought the total outstanding volume for the bond series to P291.7 billion, the Treasury said in a statement.
The bonds, which have a remaining life of five years and two months, were awarded at an average rate of 5.943%. Accepted bid yields ranged from 5.85% to 5.95%.
The average rate for the reissued papers increased by 3.5 basis points (bps) from the 5.908% fetched for the series’ last award on April 2. Still, this was 43.2 bps lower than the 6.375% coupon for the issue.
This was 2.2 bps above the 5.921% quoted for the five-year bond but 0.2 bp below the 5.945% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.
The government fully awarded its T-bond offer as the average yield was lower than the prevailing BVAL rate for the series, the BTr said.
“The yield is within market expectations. Demand was decent enough for the BTr to consider awarding,” a trader said in a text message.
The awarded bids were at the higher end of the expected range following the government’s jumbo 10-year bond issuance, but still “fair enough” for both the Treasury and investors, the trader added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said that the average yield of the issue went up from the previous award as the offering of new 10-year benchmark fixed-rate Treasury notes (FXTN) that closed last week siphoned off some liquidity from the financial system.
The government raised a total of P300 billion from its offering of new 10-year bonds, 10 times the initial P30-billion program, the BTr announced on Friday. The issuance was listed on the Philippine Dealing & Exchange Corp.’s fixed-income board on Monday.
The BTr borrowed an initial P135 billion from the bonds at the rate-setting auction on April 15 and held a public offer that ended on April 23. The notes fetched a coupon rate of 6.375%. Accepted bid yields ranged from 6% to 6.4%, resulting in an average rate of 6.286%.
The FXTN offer was held under a new issuance format targeting institutional investors like corporates, cooperatives, trust funds, retirement funds, and provident funds.
The BTr plans to raise P260 billion from the domestic market in May, or P100 billion via Treasury bills and P160 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy
