By Janine Marie D. Soliman,
Reporter

THE GOVERNMENT made a full award of reissued 10-year Treasury bonds (T-bonds) on Tuesday on the back of strong investor demand, which brought yields within market expectations.

At its auction yesterday, the Bureau of the Treasury raised P15 billion as planned from the reissued debt papers with a remaining life of nine years and eight months.

The offer was oversubscribed by almost two times after total tenders reached P28.4 billion. The bonds were quoted at an average yield of 4.718%, 2.6 basis points (bps) up compared to the 4.692% fetched when the papers were first reissued on June 13.

Yesterday’s average yield was also higher than the 4.75% coupon rate quoted for the bonds when they were first issued on May 4.

At the secondary market, the 10-year T-bonds fetched a rate of 5.0379% at noontime yesterday before the auction.

At the close of trading, the papers rallied to yield 4.7086%.

National Treasurer Rosalia V. de Leon told reporters yesterday after the auction that there was strong demand from investors for longer-termed papers despite uncertainties at home and offshore.

“We see the demand on the long end of the curve in spite of the weaknesses in the peso right now. Maybe after hearing the BSP (Bangko Sentral ng Pilipinas) governor’s statement, we should not really focus on [that], but more on the fundamentals since it’s very strong,” she said.

On Monday, BSP Governor Nestor A. Espenilla, Jr. downplayed observations that the peso has been a laggard compared to other Asian currencies over the past few weeks, saying that foreign exchange alone was an inaccurate measure of an economy’s performance.

Fast gross domestic product growth, slow inflation and job creation should also be considered, he said.

“Each economy faces its own unique challenges and should therefore be deliberately implementing policies that suit its circumstances and needs. The Philippines is doing the correct thing in prioritizing a more investment-led economic growth,” Mr. Espenilla said. “Allowing the peso to depreciate gradually to a more appropriate level is fully consistent with that strategy.”

This came after the peso slumped to a new low against the greenback on Friday at P51.49, its weakest level since a P51.60 finish on Aug. 24, 2006.

Yesterday, the peso climbed to P51.24 against the dollar.

“And then of course the very robust GDP (gross domestic product) growth for the second quarter of 6.5%… And we see again that there’s interest from the market on Marawi bonds. We have been hearing a lot of queries on the features and when we are going to the market on the issuance,” Ms. de Leon said.

Finance Secretary Carlos G. Dominguez III had announced earlier this month that they are mulling to issue P30 billion in “patriotic” bonds, and ordered the Treasury bureau to study the proposal. Funds raised will go to the repair of public and private infrastructure in Marawi City. Ms. de Leon earlier said they are looking at a five-to-seven-year tenor for the bonds.

Sought for comment, a bond trader said by phone yesterday, “So far, it was well participated after it was almost twice oversubscribed. Even though yields were higher versus the last auction, rates were within expectation.”

“Right now, the market is a bit quiet as they are on a wait-and-see mode for developments in the US, particularly US Federal Reserve Janet L. Yellen’s speech,” the trader noted.

Investors are now on a lookout for Ms. Yellen’s speech on Friday at the US central bank’s annual central banking conference in Jackson Hole, Wyoming.

The trader also noted local yields “coincide with what’s happening with the US Treasuries, which are now a bit ranging and quiet.”

The government plans to borrow as much as P195 billion from domestic sources this quarter — through offerings of P105 billion worth of Treasury bills and P90 billion in Treasury bonds — more than the P180 billion programmed in the second quarter.

In a related development, Finance Secretary Carlos G. Dominguez III said yesterday the Philippines may issue its maiden panda bonds around October or November this year.

The government was still looking at raising $200 million from the issue, he told reporters. Panda bonds are yuan-denominated debt sold in China by foreign firms or governments.

Mr. Dominguez also said the government would probably issue global bonds next year to help finance its proposed P3.77 trillion budget, but the size would not be significant. — with Reuters

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