Reissued five-year bonds to see weak demand

TREASURY BONDS (T-bond) on offer this week may see higher bids due to tight following the government’s latest offer and issuance of retail bonds.

The Bureau of the Treasury’s offer of reissued five-year T-bonds tomorrow will likely be met with thin demand, traders said last week, with the government expected to continue rejecting bids beyond the returns it is willing to pay due to its comfortable cash position.

The Treasury will offer P20-billion worth of debt papers with a remaining life of four years and one month. The bonds were originally issued last Jan. 26 and carry a coupon rate of 4%.

A trader said that the Treasury’s last auction of government securities for this year will be met with weak demand.

“I think there will be less demand for this bond. [The] market is still adjusting to the RTBs (retail Treasury bonds) and liquidity is still tighter,” a trader said.

“The banks are tight — [they are still coping] from the five-year RTBs. The size is too big,” another trader said.

The government issued retail Treasury bonds worth P255.4 billion following a public offering that started last month.

Broken down, the Treasury sold P125.4 billion during the one-week public offering on top of the P130 billion issued during the initial auction.

The Treasury last offered five-year T-bonds on Oct. 3, where it made a full award  of P15 billion as total demand reached P29.951 billion. The papers fetching an average rate of 3.979%.

“If ever” the Treasury decides to accept bids, the first trader said, yields may range between 4.5% to 4.65%.

At the secondary market on Friday, the yield on the five-year papers closed at 4.6843%, while the four-year Treasury bonds — the liquid benchmark closest to tomorrow’s offered papers — were quoted at 4.8279%.

The second trader said there is “lightened mood” in the market as the year ends.

“The market is not that keen on having those bonds because it’s already December and trading is getting slightly lighter. Every time the year comes to an end, the mood is getting lighter,” the trader mentioned, adding that interests might be renewed if the yields get attractive.

After last week’s Treasury bills (T-bill) auction, National Treasurer Rosalia V. De Leon said enthusiasm is already waning as banks “are already preparing for the closing of the books.”

The government rejected all bids at that T-bills auction as banks asked for higher returns ahead of an interest rate hike by the US Federal Reserve.

The Bureau of the Treasury rejected bids which totalled just P7.6 billion, well below the government’s planned P20-billion borrowing.

Broken down, the 91-day debt paper was met with demand worth P2.975 billion, lower than the P8 billion the Treasury offered.

The Treasury also rejected P2.325-billion worth of bids for the 182-day tenor, which also fell short of its P6-billion offer.

Lastly, the 364-day debt papers attracted only P2.276 billion in demand, likewise below the programmed borrowing of P6 billion.

Last Dec. 5, the government rejected all bids for the reissued 10-year Treasury bonds as inflation eased and amid its solid cash buffer. The Treasury refused to award the debt papers, which have a remaining life of six years and eight months, with rates rising anew. — KANV