THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday even as its average rate spiked on elevated inflation expectations.

The Bureau of the Treasury (BTr) on Tuesday borrowed P35 billion as planned via the reissued 10-year bonds, which have a remaining life of nine years and 10 months.

Total tenders seen at Tuesday’s auction reached P61.829 billion, nearly twice as much as the initial offer but lower than the P70.733 billion in bids logged the last time the BTr offered the bond series on Aug. 3.

The notes fetched an average rate of 4.246%, climbing by 33.2 basis points from 3.914% recorded in the previous auction.

This was also higher than the 4.152% quoted for the 10-year tenor at the secondary market prior to the offering, based on PHP Bloomberg Valuation Service Reference Rates.

Despite the higher rate, the Treasury opened its tap facility to raise P5 billion more via the reissued papers and accommodate the excess demand seen on Tuesday.

Renewed inflation concerns pushed up the tenor’s yield, with investors also looking for higher returns on their investments, National Treasurer Rosalia V. de Leon said.

Headline inflation picked up to 4.9% in August from 4% in July. This was its fastest pace in 32 months and was due to higher food and utility prices, the state statistics agency reported last week.

This brought average headline inflation for the first eight months to 4.4%, above the central bank’s 2-4% target and 4.1% forecast for the year.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa on Monday said inflation could hit 5% this month due to rising food and fuel costs amid the typhoon season.

Meanwhile, a bond trader said the market had expected yields to increase as there are two auctions of 10-year notes this month, with the other offering set on Sept. 28.

The Treasury is looking to raise P250 billion from the local market this month: P75 billion via weekly offers of Treasury bills and P175 billion from weekly auctions of T-bonds.

The BTr will also hold its price-setting auction for the country’s first-ever onshore retail dollar bond offering on Wednesday as it aims to raise at least $400 million via five-year and 10-year notes.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of gross domestic product. — B.M. Laforga