THE GOVERNMENT made a full award of the 10-year Treasury bonds (T-bond) it auctioned off on Tuesday and opened its tap facility once more to take advantage of overwhelming investor demand.
The Bureau of the Treasury (BTr) raised P15 billion as planned via the reissued 10-year debt papers on Tuesday, which have a remaining life of nine years and three months.
It received huge offers at P49.389 billion, more than thrice the amount the government wanted to sell.
The 10-year bonds, which carry a 6.25% coupon, fetched an average rate of 6.975%, plunging by 106 basis points from the 8.035% fetched when they were last issued on Nov. 6.
Based on the PHP Bloomberg Valuation Service Reference Rates, the 10-year debt notes were quoted at 7.027% yesterday.
National Treasurer Rosalia V. De Leon said the BTr continues to see demand from investors at the long end of the curve on the back of lower inflation expectations.
She said the Treasury reopened a tap facility from 2 to 4 p.m. yesterday to maximize the huge demand.
“We will open the [tap facility]. Same rules apply, but we don’t have a cap anymore. Before, we’re only raising P15 billion… We can upsize it more than P15 billion. So it’s depending on the discretion of the Treasury how much we will accept,” Ms. De Leon told reporters following the auction.
The Treasury awarded another P23.136 billion worth of reissued 10-year bonds via the tap window, accepting all tenders. The additional papers carry the same average yield of 6.975%.
The tap facility was available to the 10 financial institutions who have been named as market makers by the Treasury, who are given privileges such as the facility in exchange for obligations like submitting rate bids within a prescribed range.
Raising more funds from the tap facility may allow the BTr to advance its fundraising activities and avoid higher interest rates in future note offerings.
The Treasury also opened a tap window last week, raising an additional P15 billion more worth of reissued seven-year debt notes. Tenders reached P53.9 billion.
“[Investors] are locking in on the rates already based on expectations that [inflation] rate will further trend downwards given lower inflation expectations already…for November,” Ms. De Leon added.
Inflation likely printed at 6.3% in November supported by lower oil prices and improved supply, according to a BusinessWorld poll among 14 economists.
The median inflation forecast is slower than the actual 6.7% print in September and October and falls within the 5.8-6.6% target band of the Bangko Sentral ng Pilipinas.
Sought for comment, a bond trader said the market saw strong demand again at the auction as expected given that slower inflation is anticipated.
“Given that the BTr is open to…boost the bond volume now, the demand might be as high as the previous issuance,” the trader said in a phone interview ahead of the closing of the tap facility.
The Treasury is raising P270 billion from the domestic market this quarter. — Karl Angelo N. Vidal

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