Gov’t fully awards reissued T-bonds

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as the rate fetched for the tenor was broadly in line with yields at the secondary market.

The Bureau of the Treasury (BTr) raised P35 billion as planned via the reissued 25-year T-bonds it auctioned off on Tuesday. The offer was nearly two times oversubscribed as bids reached P61.914 billion. ​

The 25-year bonds, which have a remaining life of 19 years and three months, fetched an average rate of 5.084%, dropping by 25.7 basis points (bps) from the 5.341% quoted in the last successful offer of 20-year papers, which was on Nov. 25, 2019.

This was, however, higher than the 4.625% coupon quoted when the 25-year bonds were first issued on Sept. 9, 2015.

Before the auction on Tuesday, at the secondary market, the 25-year paper was quoted at 4.9323%, while the 20-year tenor fetched a rate of 4.9373%, based on PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said the government fully awarded its offer of 25-year papers as the average rate fetched on Tuesday was aligned with secondary market yields, “yielding positive real rates.”

“[We] saw strong reception for [the] reopening of 25-11, with demand [at] 1.5 times [the] offer,” Ms. De Leon told reporters in a Viber message after the auction.

She said the relatively low rate fetched for the long-tenored papers offered by the Treasury yesterday was “aligned with market expectations that inflation will be tame going into next year.”

The Bangko Sentral ng Pilipinas (BSP) last month lowered its inflation outlook this year to 3.9% from a previous estimate of 4.2%. This will put inflation back within the BSP’s 2-4% annual target.

On the other hand, the forecast for 2022 was raised to 3% from 2.8% previously.

The BSP held its key interest rate at a record low for a fourth straight meeting on May 12 as it continues to support the economy’s recovery from the pandemic. The Monetary Board’s next policy-setting meeting is scheduled on June 24.

The central bank will remain accommodative until economic recovery is sustained, with further monetary policy adjustments likely by the second half of 2022, BSP Governor Benjamin E. Diokno said on Monday.

The economy remained in a recession in the first quarter, when it shrank by 4.2%. The country’s gross domestic product contracted by a record 9.6% last year.

The government last month slashed its growth target for 2021 to 6-7% from 6.5-7.5%.

Meanwhile, a bond trader said the average rate fetched for the bonds at yesterday’s auction fell within the market’s expected range of 5% to 5.25%.

“There are certain sectors that need this type of tenor… I think the key takeaway is that market can absorb supply in this space, an indication that the market is still very liquid,” the trader said.

The government wants to raise P215 billion from the local debt market in this month: P75 billion via weekly offers of Treasury bills and P140 billion from weekly auctions of T-bonds.

It 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. — IBC