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Gov’t fully awards T-bonds, opens tap facility on demand

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THE GOVERNMENT raised P15 billion from its offering of Treasury bonds (T-bond) yesterday, and even opened a tap facility to take advantage of strong demand and lower yields.

The Bureau of the Treasury made a full award of reissued five-year papers on Wednesday, which have a remaining life of four years and three months. This was after the state received overwhelming bids at P48.857 billion, more than triple the amount it wanted to raise.

The long-term notes even fetched a lower average rate at 7.003%, coming from the 7.342% fetched when these were last issued on Oct. 9. The bonds originally carried a 5.5% coupon when they was first offered in March.

Players asked for rates ranging from 6.9-7.04%, lower than the 7-7.5% margins they wanted during last month’s offering.

This auction was rescheduled from Tuesday as the local government announced traffic rerouting and work and class suspensions in Manila for the visit of Chinese President Xi Jinping.

National Treasurer Rosalia V. De Leon said strong investor appetite for the five-year papers came as they drew optimism from slowing inflation and as players are likely “locking in” as the government’s bond auctions are winding down.




Ms. De Leon also announced that the Treasury opened a tap facility from 2 to 4 p.m. yesterday, where they looked to raise as much as P15 billion more.

“We saw very strong bids, also the rate is something that is favorable to us,” the Treasurer said.

The tap facility will be limited to the 10 firms who have been named as market makers by the Treasury, who are given privileges like this in exchange for obligations like submitting rate bids within a prescribed range.

The Treasury last opened a tap facility in January 2017.

Sought for comment, a bond trader said market players scrambled to get hold of T-bonds amid “less hawkish” signals from the United States Federal Reserve, and also mimicked lower yields on US Treasuries.

“I think the tap (facility) will also be taken by market makers because some were not able to buy (from the auction). The tap facility will be an opportunity to participate… I still think it will be fully subscribed,” the trader said by phone.

“Some players are also locking in because of the potential for yields to go lower next year.”

The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in Treasury bonds.

This is part of the P888.23-billion borrowing plan this year from local and foreign sources to fund the budget deficit and support increased government spending.

Raising more funds from the tap facility may allow the Treasury to advance its fund-raising activities and avoid higher interest rates in future note offerings. — Melissa Luz T. Lopez

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