Gov’t makes full award of fresh 7-year bonds on robust demand

THE GOVERNMENT made a full award of the Treasury bonds (T-bonds) it offered on Tuesday and opened its tap facility to borrow more as the auction attracted strong demand.

The Bureau of the Treasury (BTr) borrowed the programmed P35 billion via the fresh seven-year T-bonds auctioned off on Tuesday. It also opened its tap facility to raise P25 billion more from the papers to take advantage of the low rates offered by investors.

Total tenders reached P90.386 billion yesterday, making the T-bond offer 2.6 times oversubscribed.

The seven-year notes fetched a coupon rate of 3.625%, 4.3 basis points lower compared with the 3.668% seen for the tenor at the secondary market before the auction, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The last time the Treasury offered the seven-year tenor was on Jan. 21, 2020, when it awarded P27.203 billion in reissued papers out of the P30-billion program. That issuance was quoted at an average rate of 4.322%.

National Treasurer Rosalia V. de Leon said the government opened the tap facility after the auction saw strong demand.

“[We are] taking advantage of liquidity and this is stretching maturity,” Ms. De Leon told reporters via Viber.

A bond trader said the seven-year bonds received robust demand from the market at an “attractive” yield amid a dimmer economic outlook and easing concerns over rising inflation.

Economic managers are currently reviewing their 6.5-7.5% growth target for the year, with the reimposition of strict lockdown measures in the capital and adjacent provinces expected to dent the full-year print by 0.8 percentage point.

Meanwhile, headline inflation slowed to 4.5% in March from the 4.7% in February, driven by a slower increase in food prices.

Inflation averaged at 4.5% for the first quarter, beyond the BSP’s 2-4% target for 2021.

The Bangko Sentral ng Pilipinas (BSP) expects inflation to average 4.2% this year before easing to 2.8% in 2022. Central bank officials have said the inflation path is likely to ease below the midpoint of the 2-4% target towards the fourth quarter.

BSP Governor Benjamin E. Diokno has said the central bank will remain accommodative to support economic recovery but will continue to watch out for  potential second-round inflation effects, such as wage and transport fee hikes.

The Philippine Statistics Authority will report inflation data for April on May 5, while the first-quarter gross domestic product (GDP) report will be out on May 10.

The BTr wants to raise P170 billion from the local debt market this month: P100 billion via weekly offers of Treasury bills and P70 billion from fortnightly auctions of T-bonds.

The government is looking to borrow P3 trillion this year from domestic and external sources to help fund a budget deficit seen to hit 8.9% of gross domestic product.

The Treasury is currently preparing to tap the global debt market for the second time this year with a euro-denominated bond issuance. The offering could have potential tenors of four years, 12 years and/or 20 years, according to a report by Bloomberg.

Fitch Ratings gave a BBB rating to the proposed issuance, S&P Global Ratings  rated it with BBB+, while Moody’s Investors Service had a Baa2 rating.

The last time the government issued euro-denominated bonds was in January 2020, raising €1.2 billion via a dual-tranche offering. — Beatrice M. Laforga