Gov’t raises P10B from 3-year Treasury bonds

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THE GOVERNMENT made a full award of reissued three-year Treasury bonds (T-bonds) on Tuesday even as the rate inched higher amid strong market demand.

At yesterday’s auction, the Bureau of the Treasury raised P10 billion as planned from the reissued bonds maturing on Jan. 5, 2021. Total tenders reached P19.424 billion, nearly double the amount the government wanted to raise.

The three-year bonds fetched an average rate of 4.703%, up by about seven basis points from the 4.632% average fetched when the papers were last sold in April.

Tuesday’s awarded rate also inched up from the 4.25% coupon quoted when the papers were initially offered in January.

At the secondary market, before yesterday’s auction, the three-year papers were quoted at 5.3893%.

The bonds rallied to fetch a lower 4.6497% yield as trading closed.

Deputy Treasurer Erwin D. Sta. Ana said after the auction that the bureau received “healthy” demand for its offer of the three-year tenor.

“We received close to twice bid-to-cover ratio for [the] auction so that’s healthy demand on the three-year tenor. Average rates are within expectations so we see it as almost flattish from the previous level of that security,” Mr. Sta. Ana said. “It’s a good turnout for us.”

He added that demand for the bonds has “always been there” since the Treasury’s rates are now “relatively attractive” compared to previous levels.

“Usually the three and the five years get the most demand from our investors,” Mr. Sta. Ana added.

During last week’s auction of five-year T-bonds, the Treasury also decided to fully award the papers it placed on the auction block for a 5.452% average rate.

Mr. Sta. Ana noted that factors such as the rising inflation, as well as bets on a rate hike from the local central bank, were considered by the investors.

Headline inflation accelerated to a five-year high of 4.5% last month from the 4.3% print in March.

Amid rising inflation expectations, nine out of 11 economists polled by BusinessWorld said they expect the Bangko Sentral ng Pilipinas (BSP) to tighten monetary policy settings at Thursday’s meeting.

“All eyes are on the policy meeting on Thursday. Our inflation environment was also considered [by the investors],” Mr. Sta. Ana added.

Sought for comments, a bond trader said government auction results “[have] become more predictable.”

“[We saw a] nice auction result. It looks like the yield range at which BTr awards has become more predictable. [On Monday], the [indication] was 4.5-4.75% and the actual range was 4.55-4.75%,” the bond trader said.

The trader added that the market might continue to see some support for bonds at the short end in the near term.

The Treasury is holding two auctions per week this quarter — one for T-bonds and another for Treasury bills — to reflect increased borrowing requirements.

The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal