THE GOVERNMENT raised P15 billion as planned in reissued five-year Treasury bonds (T-bonds) on Tuesday, amid strong appetite for papers at the shorter end.

The Bureau of the Treasury fully awarded reissued government securities with a remaining life of four years and three months.

Tenders reached as much as P29.951 billion, almost twice the P15-billion offering.

The T-bonds were quoted at an average rate of 3.979%, 24.7 basis points (bps) lower than the 4.226% yield logged during the July 11 auction.

At the same time, the average yield notched yesterday was also below the original 4% coupon rate attached to the papers when they were first offered in January.

This rate was likewise lower than the 4.6107% quoted for the five-year debt papers in the secondary market before the Treasury’s auction. The yield was unchanged at the close of trading.

National Treasurer Rosalia V. De Leon said there was heightened demand for the shorter-tenored bonds as the Bangko Sentral ng Pilipinas cut its offer of 29-day term deposits for today’s auction to P100 billion from the P110 billion placed on the auction block last week.

“We saw good demand. So I guess everybody’s flocking the GS (government securities) market and the offering today is something that caters to their appetite given that it’s in the belly of the curve,” Ms. De Leon told reporters after the auction on Tuesday.

“We’re happy with the participation of the GSEDs (government securities eligible dealers). I suppose that’s because they want to improve their respective performances. Sometime before the end of the year, we’ll also be selecting our market makers, so everybody’s showing a good performance so they will be in that circle of market makers,” she added.

The official was referring to the government’s enhanced GSEDs program, where market makers are designated and expected to stand as liquidity providers and actively give bid and offer quotes to the regulator, to improve the performance of the primary debt market and at the same time, enhancing liquidity in the secondary market.

Traders interviewed meanwhile said the auctioned papers saw high demand as markets are pricing in the US Federal Reserve’s planned balance sheet unwinding, signalling a hawkish view on monetary policy.

“The auction was in line with expectations. Prior to the auction, market did bids [that] were between 3.95-4.05%, in line with market indication, and then as expected, there’s still strong demand at the shorter end. That’s why it’s two times oversubscribed – due to the Fed unwinding,” the first trader said via phone.

Another trader said the rally in yields should only be short-lived, with rates likely to rise in the long term as they track the movement of US Treasuries.

“The longer view for the yields is it should go up. There should be a short rally coming anytime now as the Treasury has been consolidating the past few days,” the second trader said by phone.

“It should be higher. It’s more of the unwinding of the Fed and then so far, locally, we’re planning to issue more bonds, so the tendency for the investors is they will wait and see the tenor levels before investing, not unless the yield is good enough,” the trader added.

Meanwhile, the government plans to offer so-called “patriotic bonds” worth P30 billion, which will be earmarked to the rehabilitation of the conflict-torn Marawi City.

Ms. De Leon, however, said that the government is currently awaiting for the needs assessment before providing concrete plan for the bond issuance.

“Anything that we will have to borrow should have an underlying spending program,” she said. — Elijah Joseph C. Tubayan

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