THE GOVERNMENT fully awarded its offered Treasury bonds (T-bonds) on Wednesday with yields inching lower, as banks ditched the central bank’s term deposit facility for government securities.

The Bureau of the Treasury (BTr) yesterday raised P15 billion as planned from the reissued seven-year debt papers with a remaining life of six years and six months.

Total tenders stood at P29 billion, nearly double the government’s offer.

The average rate went down five basis points (bps) to 4.39% from the 4.395% logged when the papers were offered last Sept. 5. Yesterday’s result was also lower than the 4.5% coupon rate quoted for the papers back in April.

Prior to the auction, the seven-year papers were quoted at 4.6157% in the secondary market.

The yield on the papers rallied as the trading session ended, standing at 4.3988%.

National Treasurer Rosalia V. De Leon said there was renewed demand for longer-dated papers as investors preferred to put their cash in government securities instead of the Bangko Sentral ng Pilipinas’ term deposit facility (TDF), which also held an auction yesterday morning.

“There’s also the liquidity coming from this morning’s auction of the TDF. I think there’s also a preference… [investors looked] for yields so they went into the seven years, moving out of the shorter tenor brackets. It shows the very liquid tone of the market,” Ms. De Leon told reporters after the auction. “We’re very pleased with the result of the auction that we see.”

Yields on the term deposits offered by the BSP stood steady yesterday, with the sideways move driven by tempered demand for the instruments.

The 28-day tenor went back to an undersubscription this week, while demand for the week-long term deposits just matched the amount offered by the central bank.

Ms. De Leon also noted that investors were on a wait-and-see mode ahead of the BSP Monetary Board’s policy meeting on Nov. 9 and a possible US Federal Reserve hike before the year ends.

Meanwhile, traders said the result was expected amid developments in the North Korea missile crisis and possible tightening from the US and Philippine central banks.

“Investors are slightly bullish right now given North Korea tensions,” one trader said in a phone interview, also noting that investors flocked to the seven-year papers as this was the second to the last offer of the tenor for this year.

“Right now, more of next offers are in 10 years. There’s still a seven-year offer in December, and as well as a four-year. Anything that’s less than 10 years, there’s demand,” the trader said.

“We’re waiting for the announcement for the next Fed, and then locally we know that there’s inflation pressure, and banks are looking at a possibility of a December rate hike for the Philippines,” a second trader said in a phone interview.

“I think those scenarios are playing a factor. That auction was good but comfortable for investors at a certain level,” the second trader added.

The Philippine Statistics Authority earlier reported that prices of widely used goods and services increased by 3.4% last month, jumping from 3.1% in August and the 2.3% logged a year ago.

BSP Governor Nestor A. Espenilla, Jr. has said that they are in no rush to tweak monetary policy settings, with the wider trade gap expected as the country imports materials it will use for its aggressive infrastructure push, and does not necessarily have to move in sync with the US’ policy stance.

The BSP has kept its policy stance steady over the last three years, except for procedural cuts which took effect in June 2016 which allowed the shift to an interest rate corridor. Currently, benchmark rates range within 2.5-3.5%.

The government plans to raise up to P150 billion from domestic sources this quarter, lower than the P195 billion programmed for the July to September period. — Elijah Joseph C. Tubayan

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