THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Wednesday as rates went up, with the market anticipating the result of the US Federal Reserve’s policy review.
The Bureau of the Treasury (BTr) on Wednesday raised P35 billion as planned via the reissued five-year T-bonds with a remaining life of four years and five months.
Tenders reached P46.65 billion, higher than the offer but lower than the P56.08 billion in bids fetched the last time these debt papers were auctioned off on Oct. 12, where the government made a full award.
The five-year notes fetched an average rate of 3.762% on Wednesday, up by 18.6 basis points from the 3.576% quoted for the tenor during the previous auction.
This was also slightly higher than the 3.75% quoted for the five-year bond at the secondary market prior to the auction, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.
National Treasurer Rosalia V. de Leon said in a Viber message to reporters after the auction that the higher rates submitted by investors in recent offerings were expected due to high inflation and expectations that the Fed would start reducing its asset purchases by this month.
“But we are in good cash position for rejection,” Ms. De Leon said.
A bond trader likewise said Wednesday’s T-bond auction attracted modest demand due to Fed taper bets.
“Strong two-way interest continued to be evident in the secondary market also ahead of October CPI (consumer price index) figure of the country to be released on Friday, so some maybe conservative on holdings ahead of the said risk events,” the trader said in a Viber message.
The US Federal Reserve is expected to announce at the conclusion of its policy meeting on Nov. 2-3 that it would taper its $120-billion monthly bond purchases.
Meanwhile, Philippine inflation likely quickened in October due to a continued rise in pump prices and a spike in food costs due to a severe tropical storm, analysts said.
A BusinessWorld poll of 21 analysts yielded a median estimate of 4.9% for the October CPI, which matches the midpoint of the 4.5-5.3% forecast given by the Bangko Sentral ng Pilipinas (BSP).
If realized, headline inflation will exceed the 2-4% BSP annual target range for the third straight month. This will also be faster than the 4.8% seen in September and the 2.5% a year earlier.
The Philippine Statistics Authority will release October inflation data on Nov. 5.
The BTr plans to raise P200 billion from the domestic market in November, or P60 billion via weekly offers of T-bills and P140 billion from weekly T-bond auctions.
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 the country’s gross domestic product. — Jenina P. Ibañez