Gov’t raises another P2.5B in bonds via tap facility

THE GOVERNMENT raised another P2.47 billion via the seven-year bonds on Tuesday after it opened its tap facility to accommodate excess demand from investors.
The Bureau of the Treasury (BTr) accepted all bids amounting to P2.474 billion through a tap facility which was opened from 2 to 4 p.m. yesterday for its market makers.
The seven-year debt papers, which carry a coupon rate of 5.75%, fetched a 7.09% average, which was based on the yield fetched during the bond auction. The average rate is 11.6 basis points higher than the 6.974% rate pegged when the seven-year bonds were offered two weeks ago.
The Treasury has cumulatively raised an additional P55.61 billion from the tap facility, which it has opened for four straight weeks after its regular auctions were oversubscribed.
The 10 market makers allowed to participate in the tap facility are Bank of the Philippine Islands, BDO Unibank, Inc., China Banking Corp., Citibank Philippines, Development Bank of the Philippines, Land Bank of the Philippines, Metropolitan Bank & Trust Co., First Metro Investment Corp., Rizal Commercial Banking Corp. and Security Bank Corp.
These financial institutions are given privileges such as the facility in exchange for obligations like submitting rate bids within a prescribed range.
Following Tuesday’s auction proper, National Treasurer Rosalia V. De Leon said the sustained appetite for the bonds came as market players anticipate that rates will go down as inflation is tapering off.
Domestic inflation eased to 6% in November from a nine-year high of 6.7% recorded in October and September, affirming views that the rise in prices has started decelerating and will eventually return to the 2-4% band targeted by the government.
Sought for comment on Wednesday, a bond trader said there was tepid demand for this week’s tap facility as the year is nearly done.
“Most banks are maybe holding off until next year. The appetite is already winding down,” the trader said in a phone interview.
However, the trader noted that the yield fetched during the Tuesday auction was still in line with market expectations.
“The average yield was within the market expectations of 6.95-7.15%. It’s still in line with the secondary [market].” — Karl Angelo N. Vidal