Gov’t makes full award of bonds

Posted on August 09, 2017

THE GOVERNMENT yesterday made a full award of reissued seven-year Treasury bonds (T-bonds) after bids by banks declined and fell within market expectations amid favorable developments offshore and at home.

The Bureau of the Treasury raised P15 billion as planned on Tuesday from its offer of the reissued seven-year bonds maturing in April 2024, with a remaining life of six years and eight months. The papers were first auctioned off on April 20, where they fetched a 4.5% coupon rate.

The average rate of the debt papers was quoted at 4.51% yesterday, 0.9 basis points (bps) down from the 4.519% average rate seen at a May 30 auction, but slightly up from the coupon rate.

At the secondary market, the seven-year papers were quoted at 4.8682% before the auction.

The paper’s yield went up to 4.509% as the trading session closed.

A trader said rates sought by financial institutions were well within market expectations, noting yields were “reasonable.”

“Since this paper is less than seven years already, it’s not bad to get it at the same rate where the benchmark 8[-year] paper is trading,” the trader said yesterday.

Meanwhile, National Treasurer Rosalia V. de Leon said authorities expected rates to go down ahead of the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board meeting this week and after July’s inflation rate came out flat.

“Healthy demand for the tenor for the auction today. Then we see also that rates have fallen... We see the anticipation for the policy rate meeting on Thursday, [where] rates would be put on hold again -- that’s coming from the central bank already...then inflation continues to be very benign...,” Ms. De Leon told reporters after the auction on Tuesday.

Preliminary data from the Philippine Statistics Authority bared domestic inflation clocked in slightly faster at 2.8% in July from the revised 2.7% in June and the 1.9% logged in July 2016 on the back of higher costs of fuel and transport.

Year-to-date, inflation averaged 3.1%, matching the BSP’s forecast for the year and well within its 2-4% target band.

Following the release of inflation data last Friday, the central bank said it still has room to keep borrowing rates unchanged. The policy-setting Monetary Board will hold a meeting this Thursday. The central bank has kept its monetary stance unchanged since September 2014, except for procedural cuts introduced in June last year for the interest rate corridor.

“And then also, coming out of the US, the reports continue to be muted and there are also indications from the [US] Fed[eral Reserve that the unwinding of the bond portfolio would be gradual. So I think this all converged for the local market to see that the rates should be lower,” the National Treasurer said.

Reuters reported global investors are still on a wait-and-see mode for the Fed to shed some light on its plan to trim its $4.2-trillion bond portfolio, which some are anticipating would begin in September.

The government is looking to borrow as much as P195 billion from domestic sources this quarter via Treasury bills and bonds. -- Janine Marie D. Soliman