Gov’t fully awards dual-tranche T-bond offering

THE GOVERNMENT made a full award of the dual-tranche Treasury bonds (T-bonds) it offered on Tuesday at average rates close to comparable secondary market levels following slower-than-expected September inflation.

The Bureau of the Treasury (BTr) raised P35 billion as planned via its dual-tenor T-bond offer as total bids reached P77.776 billion, or more than double the amount placed on the auction block.

Broken down, the Treasury borrowed the programmed P15 billion via the reissued seven-year bonds, with total bids reaching P34.436 billion or more than double the amount on offer.

This brought the total outstanding volume for the bond series to P376.4 billion.

The bonds, which have a remaining life of two years and six months, were awarded at an average rate of 5.698%. Accepted yields ranged from 5.6% to 5.71%.

The average rate of the reissued papers rose by 9.3 basis points (bps) from the 5.605% fetched for the series’ last award on Sept. 23 and was also 207.3 bps above the 3.625% coupon for the issue.

Still, this was 0.2 bp below the 5.696% fetched for the same bond series and 0.7 bp lower than the 5.705% quoted for the three-year bond — the benchmark tenor closest to the remaining life of the — at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.

Meanwhile, the government also raised P20 billion as planned from the reissued 10-year T-bonds it auctioned off, with total bids for the tenor reaching P43.45 billion.

This brought the total outstanding volume for the bond series to P462.6 billion.

The papers, which have a remaining life of nine years and six months, were awarded at an average rate of 6.043%. Accepted yields ranged from 6.035% to 6.05%.

The average rate rose by 13.6 bps from the 5.907% fetched for the series’ last award on Sept. 16 but was 33.2 bps lower than the 6.375% coupon for the issue.

This was also 0.2 bp below the 6.041% seen for the same bond series but 2.4 bps higher than the 6.019% quoted for the 10-year bond at the secondary market before Tuesday’s auction, PHP BVAL Reference Rates data showed.

T-bond yields were within market expectations and were close to comparable secondary market levels amid a lack of leads, a trader said in a text message.

The lower-than-expected September inflation print likely affected yield movements, the trader added.

Headline inflation picked up to 1.7% in September from 1.5% in August, the Philippine Statistics Authority reported on Tuesday.

This was the fastest pace in six months or since the 1.8% print in March, but was within the central bank’s 1.5-2.3% forecast for the month and below the 1.9% median estimate in a BusinessWorld poll of 12 analysts.

This also marked the seventh straight month that the consumer price index (CPI) was below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% annual target.

For the first nine months, the CPI averaged 1.7%, matching the BSP’s forecast for the year.

Meanwhile, the 10-year bond’s average rate rose from the previous award as players may have been hesitant to place their cash in longer tenors due to external risks, Rizal Commercial Banking Corp. Michael L. Ricafort said in a Viber message.

These include “concerns over long-term inflation if the Federal Reserve becomes more aggressive in cutting rates in the coming months as urged by US President Donald J. Trump recently, as this could loosen their grip on inflation and inflation expectations,” he added.

The BTr is looking to raise P180 billion from the domestic market this month, or P110 billion via Treasury bills and P70 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — A.M.C. Sy