BTr makes full award of 3-year bonds despite rate uptick

THE GOVERNMENT made a full award of the reissued three-year Treasury bonds (T-bonds) it offered on Wednesday as its yield rose with inflation expected to tick up and amid an uncertain economic outlook in the United States.

The Bureau of the Treasury (BTr) borrowed P30 billion as planned via the three-year bonds as the offer was more than twice oversubscribed, with tenders totalling P64.427 billion.

The debt papers, which have a remaining life of two years and 10 months and a coupon rate of 2.375%, fetched an average rate of 2.224%, rising by 4.2 basis points (bps) from the 2.182% quoted in the Sept. 8 auction.

At the secondary market on Wednesday, the three-year T-bonds were quoted at 2.314%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said the average yield on the three-year bonds rose as investors expect inflation to have picked up slightly last month.

“The strong volume indicated a preference for the front end of the curve. The rates were also aligned with the inflation hovering around 2.3% to 2.4%,” Ms. De Leon told reporters via Viber after the auction.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the auction result showed there is strong demand for shorter tenors.

“[The higher yield] was according to our expectation that the appetite would be really higher for shorter tenor bonds with yields also within expectations,” Mr. Asuncion said in an e-mail.

Mr. Asuncion added investors might have also considered offshore securities for better yields as the results of the presidential election in the United States is expected to affect prospects for the world’s largest economy.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the three-year bond’s average rate rose as investors are still gauging the outlook for the local economy based on key economic data due for release in the coming weeks.

Inflation may have picked up slightly in October due to a rise in food prices and transport costs, as well as the impact of base effects, analysts said.

A poll of 15 economists by BusinessWorld last week yielded a median estimate of 2.4%, close to the higher end of the 1.9-2.7% forecast given by the Bangko Sentral ng Pilipinas (BSP) and well within the 2-4% target this year.

If realized, the median estimate will be a tad faster than 2.3% in September and 0.9% in October 2019. The BSP’s latest average inflation forecast for this year is at 2.3%.

The Philippine Statistics Authority will release October inflation data on Thursday.

Meanwhile, US President Donald Trump on Wednesday falsely claimed that he had won the US election with millions of votes still uncounted after his Democratic rival, Joe Biden, said he was confident of winning a contest that will not be resolved until a handful of states complete vote counting over the next hours or days, Reuters reported.

Election laws in all US states require all votes to be counted. More votes still stood to be counted this year than in the past as people voted early by mail and in person in the face of the coronavirus pandemic.

Mr. Trump won the battlegrounds of Florida, Ohio and Texas, dashing Mr. Biden’s hopes for a decisive early victory, but Mr. Biden said he was on track to winning the White House by taking three key Rust Belt states.

Mr. Biden, 77, was eyeing the so-called “blue wall” states of Michigan, Wisconsin and Pennsylvania that sent Mr. Trump, 74, to the White House in 2016 for possible breakthroughs once those states finish counting votes in hours or days to come.

Mr. Trump has repeatedly and without evidence suggested that an increase in mail-in voting will lead to an increase in fraud, although election experts say that fraud is rare and mail-in ballots are a long-standing feature of American elections.

The Treasury plans to borrow at least P140 billion from the domestic market this month: P80 billion in weekly Treasury bill auctions and P60 billion in fortnightly T-bond auctions.

The BTr is also looking to raise at least P3 billion from an offering of Premyo bonds set to run from Nov. 11 to Dec. 18, it said on Wednesday.

The government wants to raise around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — KKTJ with Reuters