Gov’t makes full award of fresh 5-year bonds on strong demand

THE GOVERNMENT made a full award of the fresh five-year Treasury bonds (T-bonds) it auctioned off on Tuesday amid strong demand.

The Bureau of the Treasury (BTr) borrowed P35 billion via the five-year T-bonds on Tuesday as the offering was over twice oversubscribed, with bids totaling P80.7 billion.

The notes fetched a coupon rate of 3.375%, lower than the 3.3534% quoted at the secondary market on Tuesday for the tenor, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The last time the BTr offered the five-year tenor was on May 27 last year, when it made a full P30-billion award of reissued T-bonds at a lower average rate of 2.676%.

National Treasurer Rosalia V. de Leon said the BTr fully awarded its offer of fresh five-year papers as the tenor fetched a low rate on the back of strong appetite for government bonds.

Meanwhile, a bond trader said the coupon rate fetched for the five-year bonds fell within market expectations but was at the higher end of the range, which reflects the government’s need for fresh funds amid the prolonged and worsening coronavirus outbreak.

“The auction saw a strong demand but at a price the market wanted, so basically, it shows that the government is really set to borrow despite higher rates. It also took them up to the 3.475% bids just to complete the P35 billion, meaning the rest of the “demand” wanted higher rates,” the trader said in a Viber message on Tuesday.

The government increased its borrowing program for the month and is set to tap the US debt market soon before rates spike to help fund an expected increase in spending for its pandemic response.

The hard lockdown enforced in Metro Manila and nearby four provinces was extended for another week until April 11 as coronavirus cases continue to spike. The Health department reported 8,355 new cases on Monday, bringing the total number of infections to 803,398.

The government has already given P23 billion to local government units for P1,000 in cash aid for low-income Filipinos in areas covered by the tighter lockdown.

The Treasury wants to raise P170 billion from the local bond market this month, broken down into P100 billion in Treasury bills to be offered weekly and P70 billion via fortnightly auctions of T-bonds.

The government is looking to borrow P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga