THE GOVERNMENT borrowed P15 billion as planned via reissued 10-year Treasury bonds (T-bond) on offer on Wednesday amid robust demand for longer-term papers on the back of easing inflation expectations.

The Bureau of the Treasury (BTr) made a full award of the reissued 10-year debt papers it placed on the auction block yesterday, receiving bids totalling P46.468 billion, more than thrice the amount the Treasury wanted to offer.

The 10-year bonds, which carry a coupon rate of 6.875%, fetched an average yield of 5.954%, 24.2 basis points lower than the 6.196% quoted when the debt papers were last offered on March 12.

At the secondary market on Wednesday, the 10-year papers were quoted at 5.937%, based on the PHP Bloomberg Valuation Reference Rates.

Following the auction, Deputy Treasurer Erwin D. Sta. Ana said the decline in the average yield of the 10-year IOUs proves that there is market preference for longer bond tenors.

“This is primarily driven by of course the inflation print last month and I think the view moving forward,” Mr. Sta. Ana told reporters on Wednesday.

Inflation eased further to 3.3% in March versus February’s print of 3.8%. The latest figure logged a sharper slowdown than what market players expected and was near the lower end of the 3.1-3.9% estimate of the Bangko Sentral ng Pilipinas (BSP).

Market analysts said decelerating inflation gives the central bank some room to adjust policy rates and big banks’ reserve requirement ratio.

However, the BSP cautioned against swift plans to adjust borrowing costs, saying they need to be watchful about the El Niño episode as well as rising global oil prices.

“Basically, I think it has been in the reports that analysts would say inflation is possible to ease in the coming months. That’s why I said they’re looking at longer tenors because of this perception,” Mr. Sta. Ana said.

Sought for comment, a bond trader said the result of the auction was within market expectations.

“On the demand, marami pa ring naghahanap ng (many clients are still seeking for papers in the) long end, so we see client flows,” the trader said in a phone interview.

The government plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion in Treasury bonds.

PANDA BONDS
Meanwhile, Mr. Sta. Ana said the Treasury is eyeing to offer the yuan-denominated or “panda” bonds after the Holy Week break as it is still securing regulatory approvals.

“We still have yet to secure the go-ahead from NAFMII (National Association of Financial Market Institutional Investors) from China. We’re still waiting for that at this stage, but once those are sorted out, we can go ahead,” he said.

National Treasurer Rosalia V. De Leon previously said the government is seeking to sell panda bonds amounting to $300-500 million with a tenor of either three, five or seven years.

This is lower than the $230 million or 1.46 billion renminbi in panda bonds offered by the government last year. The three-year papers offered then fetched an average rate of five percent.

Apart from this, the government is also looking at offering yen-denominated or “samurai” bonds in the second half of the year totalling $1-1.5 billion, with tenors of three, five and 10 years.

The state plans to borrow P1.189 trillion this year — 75% of which will be sourced domestically while the remainder will be from foreign creditors — to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product. — Karl Angelo N. Vidal

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