THE GOVERNMENT yesterday made a full award of reissued five-year Treasury bonds (T-bonds) as bids by banks fell within market expectations even as they sought higher yields amid hawkish rhetoric from major central banks offshore.

The Bureau of the Treasury raised P15 billion as planned on Tuesday from its offer of the reissued five-year bonds with a remaining life of four years and six months. The securities were met with strong demand as total tenders reached P21.1 billion.

The average rate of the debt papers was quoted at 4.226%, 9.4 basis points (bps) higher than the 4.132% average seen when the T-bonds were auctioned off last March 21 and also up from its 4% coupon rate. Authorities also made a full award of the bonds during the previous auction.

National Treasurer Rosalia V. de Leon said authorities had expected rates requested by banks to go up after central banks abroad expressed that they remain keen on hiking interest rates.

“That is expected, that there will really be spike in the rates given the pronouncements of the central banks about tightening — the tightening bias,” Ms. De Leon told reporters after yesterday’s auction.

Last month, the world’s top central banks — namely the US Federal Reserve, Bank of England, European Central Bank and Bank of Japan — delivered what seemed to be a collective message that quantitative easing is being put back in its box and interest rates are going up.

This came after the Fed’s decision to lift borrowing costs for the second time this year during their policy meeting earlier in June.

Ms. De Leon also noted yields seen were tracking the rise in rates in the fixed-income market in the previous weeks.

“We’ve seen also the movements of the GS in the past weeks on an uptrend and even in terms of the last done deal… It is not really very far as to what was in the secondary [market] this morning, so we made a full award,” she said on Tuesday.

At the secondary market, the five-year bonds were quoted at 4.19% before the auction. At the close of trading, the papers fetched a slightly higher yield of 4.1932%.

Sought for comment, a bond trader said in a text message on Tuesday: “Though the rates came out as expected, the bid-to-cover ratio is not that good compared to previous FXTN (fixed rate Treasury note) auctions this year.”

“Also, looks like appetite for short-term bonds has waned given expectations of higher global short-term interest rates,” the trader added.

The government is looking to borrow up to P180 billion from domestic sources this quarter through offerings of P90 billion worth apiece of both Treasury bills and T-bonds to fund its fiscal deficit.

It raised P150.602 billion from the sale of government-issued papers during the first quarter, lower than its P180-billion program.

Meanwhile, asked if the government has scheduled its planned issuance of yuan-denominated debt papers this semester, Ms. De Leon said, “Wala pa (None yet,) we are still waiting for approvals and of course, we are still watching the market, the panda [bond] market.”

Finance Secretary Carlos G. Dominguez III in April announced his proposal to issue debt notes in the Chinese currency worth $200 million within the “third of fourth quarter” of this year. He said the papers could be in three- and five-year tenors. — Janine Marie D. Soliman

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