THE government fully awarded the reissued Treasury bonds (T-bonds) it offered on Tuesday at a lower rate as the financial system remains liquid and on expectations of supportive monetary policy here and abroad.
The Bureau of the Treasury (BTr) borrowed P35 billion as planned via the reissued 10-year T-bonds it offered on Tuesday as the offering was 2.4 times oversubscribed, with bids reaching P84.24 billion.
The debt papers, which have a remaining life of nine years and 24 days, fetched an average rate of 3.719%, down by 89.5 basis points (bps) from the 4.614% quoted when the bond series was last offered on March 23.
The rate fetched on Tuesday was also lower by 1.47 bps compared with the 3.866% quoted for the 10-year papers at the secondary market before the auction on Tuesday, based on PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.
The low rate and strong demand caused the Treasury to open its tap facility to raise another P10 billion from the reissued 10-year papers.
National Treasurer Rosalia V. de Leon said high liquidity in the market caused the 10-year bond’s rate to go down as players were looking to reinvest their extra cash following the recent maturity of P131 billion worth of retail Treasury bonds (RTB).
Meanwhile, a trader attributed the lower T-bond rate to market expectations that central banks here and abroad will keep borrowing costs low to support economic recovery.
“The market picked up where it left off following the strong bond auction last week. Investors continue to reach for yields amid a relatively low interest rate backdrop, with both the Fed (US Federal Reserve) and BSP (Bangko Sentral ng Pilipinas) seen to keep their monetary policy settings steady to support the economic rebound,” a trader said in a Viber message.
The US central bank’s Federal Open Market Committee is meeting on June 15-16 to review its policy stance and is expected to keep its rates at near zero as the world’s largest economy continues to recover.
Fed officials, led by Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come but recent economic data has raised concerns that price pressure could force an earlier stimulus withdrawal, Reuters reported.
Meanwhile, at home, BSP officials have said they would keep borrowing costs steady until the economy’s recovery becomes more solid. Benchmark interest rates have been at record lows since November.
The BSP Monetary Board will meet to review its own policy stance on June 24.
The BTr wants to raise P215 billion from the local debt market this month: P75 billion via weekly offers of Treasury bills and P140 billion from weekly auctions of T-bonds.
The government is looking to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.4% of gross domestic product. — L.W.T. Noble with Reuters