Gov’t makes full award of fresh 3.5-year bonds on strong demand
THE GOVERNMENT fully awarded the fresh 3.5-year Treasury bonds (T-bonds) it auctioned off on Tuesday amid strong demand that led it to open its tap facility to offer another P10 billion in the papers.
The Bureau of the Treasury (BTr) on Tuesday raised P35 billion as planned from its offer of fresh 3.5-year securities maturing on Feb. 4, 2026, with total bids for the tenor reaching P106.32 billion or more than thrice the amount on the auction block.
The debt papers were awarded at a coupon rate of 5.25%, 11.3 basis points (bps) lower than the 5.363% quoted for the fixed-rate Treasury note (FXTN) 7-62 or seven-year bonds maturing on Feb. 14, 2026 and 23.9 bps below the 5.489% seen for the four-year tenor at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation (BVAL) Reference Rates data provided by the BTr.
Accepted rates ranged from 5% to 5.25% for an average rate of 5.153%.
To accommodate the strong demand seen for Tuesday’s offering, the Treasury opened its tap facility to raise P10 billion more via the bonds at the coupon rate awarded for the tenor.
“Impressive auction results with strong demand coupled with lower rates versus secondary level of comparator with similar tenor,” National Treasurer Rosalia V. de Leon said in a Viber message to reporters on Tuesday.
Ms. De Leon said P37 billion in extra liquidity from maturing papers “also found a home in [Tuesday’s] offering.”
“Another strong auction for third straight week,” a bond trader said. “It can be attributed to recent drop in yields and also support from today’s FXTN maturity.”
Bond rates at the secondary market, especially those at the belly of the curve, have declined, amid strong demand for longer tenors.
The Treasury last month made full awards of all its T-bond offerings as investors are looking for higher yields amid expectations of higher interest rates due to sustained inflationary pressures.
The Bangko Sentral ng Pilipinas (BSP) has raised benchmark interest rates by a total of 125 bps so far this year as inflation remains elevated.
BSP Governor Felipe M. Medalla last week signaled a hike of 25 or 50 bps at their Aug. 18 meeting, although he ruled out another off-cycle increase. The central bank had raised rates by 75 bps in a surprise move on July 14.
Headline inflation hit a near four-year high of 6.1% in June, bringing the first-half average to 4.4%, above the central bank’s 2-4% target and 5% forecast for the year.
The BSP expects the July reading to be in the 5.6-6.4% range. July inflation data will be released on Friday.
The BTr wants to raise P215 billion from the domestic market this month, or P75 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 P1.65 trillion this year, equivalent to 7.6% of gross domestic product. — D.G.C. Robles
