Gov’t partially awards T-bonds as investors ask for high yields

THE GOVERNMENT partially awarded the reissued Treasury bonds (T-bonds) it offered on Tuesday as investors asked for higher yields despite easing inflation.

The Bureau of the Treasury (BTr) raised just P22.126 billion via the reissued five-year T-bonds it auctioned off on Tuesday, less than the programmed P35 billion, even as the offering attracted P58.277 billion in bids.

The debt papers, which have a remaining life of four years and two months, were awarded at an average rate of 4.012%, up by 25 basis points (bps) from the 3.762% quoted when the series was last offered on Nov. 3.

The average yield fetched for the debt papers was also higher than the 3.8198% quoted for the four-year tenor — the closest benchmark to the remaining life of the reissued papers — at the secondary market prior to the auction, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Had the Treasury made a full award of its offer, the reissued bonds would have fetched an average rate of 4.051%.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters after the auction that the Treasury partially awarded its offer of reissued papers because the highest submitted rate of 4.15% was well above fair value for the security.

“Inflation will trend downward,” she said. “BSP (Bangko Sentral ng Pilipinas) [will be] patiently supportive to allow [the] economy to recover.”

Headline inflation in December eased to 3.6%, its lowest in a year, from the 4.2% recorded in November as food and transport costs slowed.

The December print brought the 2021 average to a three-year high of 4.5%, breaching the 2-4% target of the central bank as well as its revised 4.4% forecast.

Meanwhile, a bond trader said rates likely increased because the market is looking at the trajectory of global rates instead of domestic inflation.

“Investors are asking for more yield as buffer given expectations of US rate hike will spillover to short-term rates once it happens,” the trader said in a Viber message.

“Looks like market is more comfortable buying shorter tenors rather than four-year tenors and longer.”

Minutes of the latest US Federal Reserve meeting suggested rate hikes earlier than anticipated. On Monday, the International Monetary Fund said emerging economies should prepare for a US Fed policy tightening that could rattle financial markets.

In response, Ms. De Leon said the Treasury has been “mindful of Fed actions.”

“But of course, we take comfort in [BSP Governor Benjamin E. Diokno’s] statements being patiently accommodative to support the recovery.”

Mr. Diokno has said the BSP will continue to keep rates low to boost the economy.

The central bank kept policy rates at record lows for the entire 2021 to support the recovery, with the BSP stressing that elevated inflation caused by low supply in meat products will be better addressed by non-monetary measures.

Prior to this, the Monetary Board slashed rates by a total of 200 bps to support the economy.

The BTr plans to borrow P200 billion from the domestic market this month, or P60 billion via Treasury bills and P140 billion from T-bonds.

The government borrows from local and external sources to help fund a budget deficit seen to hit 7.7% of gross domestic product this year. — Jenina P. Ibañez