THE GOVERNMENT made a full award of the reissued 10-year Treasury bonds (T-bond) it auctioned off yesterday as rates settled within expectation as the market expects the central bank to halt its easing cycle as it reviews policy settings this week.
The Bureau of the Treasury (BTr) raised P20 billion as planned from its T-bond offer on Tuesday as the 10-year securities attracted total bids of P29.3 billion.
The 10-year debt papers fetched an average rate of 4.617%, higher by 42.1 basis points (bps) than the 4.196% fetched during the auction last Aug. 13.
At the secondary market on Tuesday, the ten-year notes were quoted at 4.698%, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates published on the Philippine Dealing System’s website.
Following the auction, Deputy Treasurer Erwin D. Sta Ana said the 10-year bond’s rate fell within the acceptable range and still lower than the benchmark yields based on the BVAL rates, so they decided to make a full award.
“We saw that the 10-year rate is actually at its lowest sometime in August this year, but after August it picked up. So now we’re just a little bit stable at 10-year. So we saw that it is really the rate that is the acceptable rate for the 10-year auction,” Mr. Sta Ana told reporters.
Sought for comment, a bond trader said rates seen yesterday were at the “higher end” of market expectations as the market expects the Bangko Sentral ng Pilipinas (BSP) to pause its monetary easing cycle.
“It’s on the higher end of market expectation given that we expect the BSP will hold its policy rates on the upcoming policy meeting,” the trader said over the phone.
BSP Governor Benjamin E. Diokno said in separate television interviews this month that the central bank is likely done cutting rates for the year.
The BSP’s Monetary Board will hold a policy meeting on Thursday, Nov. 14.
The trader added that higher yields on US Treasuries might have also caused local bond rates to go up.
Meanwhile, Mr. Sta. Ana said the Treasury has yet to give an official announcement on the official mechanics for the raffle of its planned prize bonds as they are still finalizing “technical details.”
He added that availing the prize bonds will be more convenient for investors since they will now use the online platform through the server of Land Bank of the Philippines.
However, he assured that over-the-counter processes will still be available in other banks.
Citing preliminary mechanics, Mr. Sta. Ana said investors can only avail a maximum of P10 million worth of entries for the raffle, translating to 20,000 entries in denominations of P500 each.
However, there will be no cap on the amount that an individual can invest in the prize bonds.
“We’re still in (holiday season) period anyway, we’re just almost in the middle of November. So if ever things are finalized in the next couple of days — what do we know, maybe next week or end of the month — there’s still likelihood that we would be able to launch this November,” he added.
The government is planning to borrow P220 billion from the domestic market this quarter broken down into P100 billion in Treasury bills and P120 billion via T-bonds.
It is looking to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga