Reissued 10-year Treasury bonds fully awarded

THE GOVERNMENT fully awarded the Treasury bonds (T-bonds) it auctioned off on Tuesday even as the average rate was higher than the coupon to track the increase in US benchmark yields.

The Bureau of the Treasury (BTr) on Tuesday raised P35 billion as planned via the reissued 10-year T-bonds it auctioned off, which have a remaining life of nine years and 11 months. The tenor fetched bids amounting to P51.077 billion.

The reissued 10-year papers fetched an average rate of 5.093%. This was 21.8 basis points (bps) higher than the 4.875% coupon rate quoted when the papers were first offered on Jan. 18.

The average yield was also higher by 11.72 bps than the 4.9758% quoted for the 10-year tenor on Monday at the secondary market, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

“The average rate [was] marginally higher than secondary level as local rate tracked [the] climb in US Treasuries,” National Treasurer Rosalia V. de Leon said in a Viber message to reporters.

The prospect of rate hikes has bond markets reeling, and in Asia both Treasuries and Japanese government bond yields rose, with the rate of benchmark 10-year Treasuries were up about 3 basis points to 1.95% on Tuesday, Reuters reported.

“The range as to where it was awarded just reflects where the demand is given the backdrop of higher yields due to hawkish shift by major central banks,” a trader said in a Viber message.

The US Federal Reserve last month said it may start increasing interest rates by March to quell elevated inflation and as the economy recovers.

Over the weekend, Dutch Central Bank President Klaas Knot, who is also a member of the European Central Bank’s (ECB) governing council, said he expects the ECB to start hiking rates by the fourth quarter of 2022.

ECB President Christine Lagarde last week said they would not explicitly rule out the possibility of a hike within the year, a change from her previous stance that such move will be unlikely.

For this month, the BTr is looking to raise P200 billion from the domestic market, or P60 billion through Treasury bills and P140 billion via T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product in 2022. — L.W.T. Noble with Reuters