Gov’t makes full award of reissued bonds

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it auctioned off on Tuesday as yields declined on healthy demand for papers with longer tenors.

The Bureau of the Treasury (BTr) raised P35 billion as planned via the reissued 25-year T-bonds it offered on Tuesday, which have a remaining life of 19 years and 26 days.

The auction was met with P55.95 billion in total tenders, making the offer 1.6 times oversubscribed. However, this was lower than the P61.9 billion in bids recorded when this bond series was last offered on June 1.

The 25-year bonds fetched an average rate of 4.986%, lower by 9.8 basis points from the 5.084% average yield seen when the series was last offered on June 1.

Compared with the secondary market level, however, this was higher than the 4.887% yield quoted for 20-year tenor, which is the nearest benchmark for the remaining life of the bonds on offer.

The BTr opened its tap facility to raise an additional P7 billion via the notes to take advantage of the strong demand and relatively low rate seen for the bond offer.

National Treasurer Rosalia V. de Leon said the healthy demand from the market helped pull down the 25-year bond’s average rate at Tuesday’s auction.

Ms. De Leon said there is strong appetite for long-dated bonds as investors are seeking higher returns.

A bond trader agreed and added that strong liquidity in financial system supported demand for longer-term bonds.

“In addition, the government has been optimistic that the 6-7% GDP (gross domestic product) growth target for the year is doable,” the trader said via Viber.

The interagency Development Budget Coordination Committee (DBCC) last month kept its 6-7% GDP growth target for the year, as well as its 7-9% projection for 2022.

However, it is set to meet on Wednesday to revisit its growth targets and other macroeconomic assumptions to consider the impact of the hard lockdowns reimposed in Metro Manila and other parts of the country experiencing a fresh surge in coronavirus infections.

The Health department reported 14,610 new infections on Monday, bringing the total number of active cases in the country to 106,672.

The economy grew by a faster-than-expected 11.8% in the second quarter, a turnaround from the 3.9% contraction recorded in the first three months of the year and the 17% slump in the comparable year-ago period.

On a quarter-on-quarter basis, however, GDP declined by 1.3% in the April-June period.

The economy has to grow by 8.2% in the second half to meet the lower end of the government’s target.

The BTr is looking to raise P200 billion from the local market this month: P60 billion via weekly offers of Treasury bills and P140 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of GDP. — B.M. Laforga