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THE GOVERNMENT fully awarded the seven-year Treasury bonds (T-bonds) it offered on Tuesday and also opened its tap facility, even as the tenor fetched a higher rate as investors remained cautious over inflation risks.

The Bureau of the Treasury (BTr) raised P35 billion as planned via the reissued seven-year T-bonds it auctioned off on Tuesday. The auction was 2.4 times oversubscribed as total bids reached P84.305 billion.

The demand seen on Tuesday, however, was lower than the P90.386 billion in tenders logged during the previous auction on April 20.

The BTr also opened its tap facility to borrow another P10 billion via the tenor.

The bonds, which have a remaining life of six years and 11 months, fetched an average rate of 3.678%, up by 5.3 basis points from its 3.625% coupon.

At the secondary market on Tuesday, before the auction, the seven-year bonds were quoted at 3.6024%.

National Treasurer Rosalia V. de Leon told reporters via Viber after the auction that investors continue to be concerned over prices, which caused the average rate for the seven-year bonds to edge up on Tuesday.

Meanwhile, a bond trader said the higher yield fetched for the papers shows that the market’s “interest is only up to this tenor” as the country’s economic outlook remains uncertain as the pandemic stretches on.

Headline inflation was unchanged at 4.5% in April, but still faster than the year-ago level of 2.2%, amid a slower increase in food prices. The four-month inflation average stood at the same pace.

The Bangko Sentral ng Pilipinas (BSP) last week lowered its inflation outlook for this year to 3.9% from its previous estimate of 4.2%. This will put inflation back within the central bank’s 2-4% annual target. On the other hand, the 2022 forecast was raised to 3% from 2.8% previously.

The central bank held its key rate at a record low for a fourth straight meeting on Wednesday amid this easing price outlook and as it continues to support the economy’s recovery from the pandemic.

The Monetary Board maintained the overnight reverse repurchase rate at its record low of 2%. Both the lending and deposit rates were also kept at 2.5% and 1.5%, respectively.

The central bank’s decision to keep rates steady came a day after release of disappointing first-quarter gross domestic product (GDP) data. For the first three months of 2021, GDP shrank by an annual 4.2%, keeping the economy in recession for a fifth consecutive quarter.

The BTr on Monday made a full P25-billion award of its offer of Treasury bills (T-bills) as rates inched down across the board. It raised another P5 billion via the papers through its tap facility.

The Treasury wants to raise P170 billion from the local bond market this month: P100 billion via weekly offerings of T-bills and P70 billion from T-bonds to be auctioned off fortnightly.

The government is looking to borrow P3 trillion this year from domestic and external sources to help fund its budget deficit seen to hit 8.9% of gross domestic product. — B.M. Laforga