THE GOVERNMENT partially awarded the 10-year Treasury bonds (T-bonds) it offered on Tuesday, with yields continuing to rise, as the market still prefer short-dated papers due to the expectations of another rate hike here and abroad.
The Bureau of the Treasury (BTr) only borrowed P4.08 billion of its P10-billion program at yesterday’s auction of reissued 10-year papers with a remaining life of nine years and 10 months.
The Treasury opted to reject some tenders even as the offer was oversubscribed, with bids reaching P13.354 billion.
The average rate stood at 6.35%, 13.7 basis points higher than the 6.213% logged on April 17 when the bonds were previously issued. The bonds carry a 6.25% coupon.
Yesterday’s average, however, was lower than the 6.9625% quoted for the bonds at the secondary market before the auction.
At the close of trading, the 10-year papers rallied to fetch a 6.32% yield.
After the auction, National Treasurer Rosalia V. De Leon said the Treasury opted to partially award the bonds as market appetite was concentrated on the shorter-dated securities.
“The preference continues to be [on the short-dated tenors],” Ms. De Leon said, adding that the “sweet spot” for the investors continues to be the three- and five-year bonds.
“They’re still worried about further rate hikes by the Fed (US Federal Reserve), and eventually also the next action of the [local] central bank,” she said.
Reuters reported that Philadelphia Fed President Patrick Harker said on Monday the monetary authority should hike interest rates two or three more times this year, and could tweak as soon as next month, amid rising inflation.
Meanwhile, the policy-setting Monetary Board of the Bangko Sentral ng Pilipinas (BSP) hiked key rates by 25 basis points during their third meeting of the year amid accelerating inflation and robust economic growth.
However, BSP Deputy Governor Diwa C. Guinigundo earlier said the 25-basis-point hike is sufficient to curb rising inflation.
“Some analysts are even predicting another hike if ever by the BSP this June. They continue to have some cautiousness in terms of being able to make sure [that] they would still be within the bond curve,” Ms. De Leon added, noting that the rising oil prices and US Treasury yields were also factored in by banks.
OPTIONS
Meanwhile, Ms. De Leon said that the Treasury is considering financing options other than the regular weekly offerings following the partial awards and rejections during the previous auctions.
“We [might] have a bigger offering like a retail Treasury bond (RTB). We also have the option to do an external financing instead of domestic,” she said. “We’ll have to match it with the requirements on the spending side. But the good thing for us is the revenue collection is also improving significantly. That’s also compensating for the lower awards.”
Sought for comment, a bond trader said the result of yesterday’s auction shows the market is waiting for the announcement of an RTB.
“This auction only shows us that market is still waiting for the RTB announcement so there will be less demand for bonds with tenor of more than five years,” the trader said in a text message.
The Treasury raised P255.4 billion from its last RTB issuance in November.
The bond trader added: “Looks like more than half of the market players wanted BTr to give higher rates, but it settled at a high of 6.375%.”
The national government borrows from local and foreign sources to fund increased spending plans and boost economic activity.
The government plans to borrow a total of P888.23 billion this year to plug its budget deficit capped at three percent of the country’s gross domestic product. — Karl Angelo N. Vidal

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