THE GOVERNMENT made a full award of the dual-tranche Treasury bonds (T-bonds) it offered on Wednesday, with investors swamping the shorter tenor amid dovish signals from the Bangko Sentral ng Pilipinas (BSP).
The Bureau of the Treasury (BTr) raised P35 billion as planned via its dual-tenor T-bond offer as total bids reached P91.812 billion, or more than double the amount placed on the auction block.
Broken down, the Treasury borrowed the programmed P15 billion via the reissued seven-year bonds, with total bids reaching P63.922 billion or more than four times the amount on offer.
“The auction was met with heavy demand… With its decision, the Committee raised the full program of P15 billion, bringing the outstanding volume for the series to P301.4 billion,” the Treasury said in a statement, adding that the bond fetched an average rate that was lower than what was quoted for the previous reissuance and the comparable secondary market benchmark yield.
The bonds, which have a remaining life of two years and 11 months, were awarded at an average rate of 5.703%. Accepted yields ranged from 5.65% to 5.75%.
The average rate of the reissued papers went down by 7.6 basis points (bps) from the 5.779% fetched for the series’ last award on March 25, but was 207.8 bps above the 3.625% coupon for the issue.
This was also 6 bps below the 5.763% fetched for the same bond series and 8.7 bps lower than the 5.79% quoted for the three-year bond — the benchmark tenor closest to the remaining life of the issue — at the secondary market before Wednesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.
Meanwhile, the government also raised P25 billion as planned from the reissued 20-year T-bonds it auctioned off on Wednesday, with total bids for the tenor reaching P27.89 billion.
This brought the total outstanding volume for the bond series to P192.7 billion.
The notes, which have a remaining life of 19 years and 13 days, were awarded at an average rate of 6.486%. Accepted yields ranged from 6.375% to 6.618%.
The average rate rose by 11 bps from the 6.376% fetched for the series’ last award on Feb. 25 but was 38.9 bps lower than the 6.875% coupon for the issue.
This was also 8.8 bps above the 6.398% seen for the same bond series and 23.6 bps higher than the 6.25% quoted for the 20-year bond at the secondary market before Wednesday’s auction, PHP BVAL Reference Rates data showed.
The Treasury fully awarded the reissued seven-year bonds as the offer was met with strong demand, a trader said in a text message.
“The 20-year reissue, on the other hand, was awarded at the higher end of the expected range,” the trader added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the reissued seven-year papers fetched lower yields following dovish signals from the BSP chief.
BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board was open to cutting rates by a further 75 bps this year amid easing inflation.
The Monetary Board last month resumed its easing cycle after an unexpected pause in February, cutting benchmark rates by 25 bps to bring the policy rate to 5.5%. Its next meeting is on June 19.
April inflation slowed to an over five-year low of 1.4% from 1.8% in March and 3.8% a year earlier. For the first four months, it averaged 2%, at the low end of the BSP’s 2-4% annual target.
Meanwhile, the 20-year bond’s average yield rose was higher than what was quoted for the previous reissue and prevailing BVAL rates after the BTr’s recent jumbo issuance of 10-year benchmark fixed rate Treasury notes siphoned off some liquidity from the market.
The BTr is looking to raise P260 billion from the domestic market this month, 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. — Aaron Michael C. Sy
