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BSP exec touts hedging facility’s peso support

A HEDGING FACILITY put in place by the central bank to help support the peso has helped the currency recover in recent days, with an analyst noting that the unit may strengthen closer to P53 versus the dollar next month.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said last week that the Currency Risk Protection Program (CRPP) has helped lift the peso from fresh 12-year lows seen earlier this month.
The peso has seen a marked recovery since last week, just as implementing rules released by the central bank took effect. Ms. Fonacier told reporters on Friday that the central bank has seen numerous availments under the CRPP, which “partly” helped boost the peso against the dollar. “Definitely, I know there are a lot of takers. Who wouldn’t like to hedge and lock in that amount?,” Ms. Fonacier said.
The CRRP facility is a non-deliverable peso-dollar forward contract between the BSP and local universal and commercial banks, which in turn will serve as a hedge fund for bank clients wanting to protect themselves from greater currency volatility. Under the facility, parties agree that on maturity of the forward contract, only the net difference between the contracted forward rate and the spot rate shall be settled in pesos. These hedging contracts last for 90 days, although clients have the option to reavail. Firms with foreign currency debt of at least $50,000 can hedge their exposures through agent banks. This mechanism, in turn, is expected to help temper dollar demand at the spot market.
CLOSER TO P53
Michael L. Ricafort, economist at Rizal Commercial Banking Corp. (RCBC), said availments under the CRPP can sustain the peso’s appreciation closer to the P53 mark “over the next two weeks.”
After touching a low of P54.325 versus the greenback in late September, the peso recovered in recent weeks and even touched P53.70 to $1 on Friday, its best performance in over a month. The local unit closed at P53.815 on Tuesday, still 7.8% weaker year to date.
The bank economist added that this could be an opportune time for the BSP to beef up its gross international reserves (GIR) anew, following declines in recent months.
“The central bank has already signalled about a month ago or so that they will also be ready to replenish the GIR during this time of the year if the peso appreciates. We have seen some decline in the GIR recently, part of which probably to defend the currency to smoothen the depreciation,” Mr. Ricafort said.
The country’s foreign currency reserves dipped to a seven-year-low $75.161 billion in September on the back of lower gold valuations and as the central bank tapped the stash for its foreign exchange operations. The current GIR level settled below the $80-billion forecast for the entire year, and is also lower than the $81.57-billion reserves held at end-2017.
“The latest figures still reflect some declines in the GIR… But P53 is already better than consensus,” Mr. Ricafort added.
The GIR is a key measure of economic resilience since it serves as a buffer against external shocks. The reserves are enough to cover 6.8 months’ worth of imports or nearly six times the country’s foreign debt falling due within 12 months, according to the central bank. — Melissa Luz T. Lopez

Uy firm gets original proponent status for Davao airport project


BUSINESSMAN Dennis A. Uy’s Chelsea Logistics Holdings Corp. (CLC) has been given original proponent status (OPS) by the government for its P49 billion proposal to operate and expand the Davao International Airport.
In a statement, the Department of Transportation (DoTr) said the Civil Aviation Authority of the Philippines (CAAP) on Friday granted OPS to Chelsea Logistics for its Davao airport proposal, and Mega 7 Construction Corporation for its P3.8 billion proposal to upgrade the Kalibo International Airport.
“The (CAAP) Board is currently meeting with the proponents to facilitate completion of requirements by the National Economic Development Authority (NEDA), who will still evaluate the proposals for approval,” the DoTr said.
CLC last May 28 submitted its unsolicited proposal to operate, maintain and expand the Davao International Airport.
Mega 7, on the other hand, sent its unsolicited proposal for the operations, maintenance and upgrade of the Kalibo International Airport last Aug. 6.
The proposals of CLC and Mega 7 both include the expansion of passenger terminal buildings at the Davao and Kalibo airports, respectively. Both firms proposed a concession period of 30 years.
The DoTr and CAAP did not have any objections to the two airport proposals.
Once the proposals are given the go signal by the NEDA Investment Coordination Committee, they will be endorsed to the NEDA Board, led by President Rodrigo R. Duterte, for final approval.
As unsolicited proposals, the two airport projects will have to undergo a Swiss challenge, where other companies can make competing offers, while giving the original proponent the right to match them.
Prior to its proposal for the Davao airport, CLC first submitted a P67 billion proposal to develop, operate and maintain both the Davao airport and New Bohol (Panglao) International Airport. The DoTr did not want a bundled proposal, prompting CLC to focus on solely on the Davao airport.
Mega 7 was first rejected by DoTr, after it discovered the company is 90% owned by Digichive Philippines Corp. which is primarily engaged in marketing and advertising, and 10% is owned by Dominion Intertrade Corp., which is engaged in general wholesale merchandise.
“The proponent does not exhibit sufficient experience in airport development, operations, and maintenance,” the DoTr earlier said.
Shares in CLC rose by 20 centavos or 3.53% to close at P5.87 each on Tuesday. — Reicelene Joy C. Ignacio

Makati awards subway project to Antonio Tiu-led consortium

THE consortium led by IRC Properties, Inc. can now proceed with its $3.7-billion Makati Subway System project, after securing the nod of the Makati City government.
In a disclosure to the stock exchange on Tuesday, the listed firm led by businessman Antonio L. Tiu said it has received the notice of award from Makati’s Public-Private Partnership Committee for the construction and operation of the 11-kilometer subway through a joint venture agreement.
The consortium, which includes IRC and Chinese partners Greenland Holdings Group, Jiangsu Provincial Construction Group Co. Ltd., Holdings Ltd., and China Harbour Engineering Company Ltd., is the original proponent for the project. There were no competing bids submitted during the Swiss challenge. “The company shall, in due course, inform the public through a disclosure the schedule of commencement of operations, including ground breaking activities,” IRC said.
The Makati Subway System will have eight to 10 underground stations in key areas such as Ayala Avenue, Makati City Hall, Poblacion Heritage Site, University of Makati, and Ospital ng Makati.
To be built at no cost to the government, the consortium expects to accommodate up to 700,000 passengers per day aboard six car trains with a capacity of about 200 people each.
The subway will also have provisions to be interlinked with other mass transport systems such as the Metro Rail Transit Line 3, the Pasig River ferry, and the proposed Metro Manila Mega Subway.
The Makati City government earlier said the project is scheduled for groundbreaking by December, with completion targeted for 2025.
To support its foray into infrastructure, IRC increased its authorized capital stock to P19.5 billion, consisting of 9.5 billion common shares with a par value of P1 per share and one billion preferred shares with a par value of P10 per share.
The company said the shares may be issued through private placement, preemptive rights offering, or other such agreements.
In a separate disclosure, IRC said it signed subscription agreements with two companies on Tuesday, allowing it to raise P4.97 billion in fresh capital.
Aggregate Business Group Holdings, Inc. (ABG), which already holds a 26.94% stake in IRC prior to the agreement, further subscribed to 4.15 billion common shares in the company at P1.10 apiece, for a total of P4.56 billion.
Auspicious One-Belt-One-Road Fund (AOF) meanwhile subscribed to 368.18 million common shares in the company at the same price, amounting to P404.99 million.
The shares were taken from the increase in IRC’s outstanding capital stock.
The Philippine Stock Exchange suspended trading of IRC shares following the disclosure, explaining that the transaction is covered by rules on backdoor listing. Prior to being suspended, IRC shares jumped 3.1% or eight centavos to P2.66 each. — Arra B. Francia

Cebu condo expected to generate P1.5-B sales

Megaworld Artist’s perspective of La Victoria Global Residences at The Mactan Newtown

MEGAWORLD Corporation said it expects to generate P1.5 billion in sales from its fourth residential project in The Mactan Newtown in Lapu-Lapu City, Cebu.
In a statement, the property developer said the 20-storey La Victoria Global Residences will have 181 units.
The condominium tower’s Spanish-inspired architecture reflects the historical significance of Galleon Victoria. The ship brought Ferdinand Magellan to Cebu island in 1521.
“Galleon Victoria arrived in the Philippines in 1521, and completed its circumnavigation of the globe in 1522. This piece of history that eventually showcased the victory of native Filipinos will be commemorated by this new residential tower inside The Mactan Newtown,” Noli D. Hernandez, president of Megaworld Cebu Properties, Inc., was quoted as saying.
Mr. Hernandez said La Victoria Global Residences is expected to be completed by 2022, in time for the Galleon Victoria’s 500th year of circumnavigation.
Units at the tower feature studio units of up to 40 square meters (sq.m.); one-bedroom units of up to 53 sq.m.; two-bedroom units of up to 80 sq.m.; and three-bedroom units of up to 118 sq.m. All units will have their own balconies.
La Victoria Global Residences will have an infinity pool, kiddie pool, pool lounge, reading lounge, children’s play area, fitness center, jogging path, day-care center and a function room.
The Mactan Newtown is also home to residential developments 8 Newtown Boulevard, One Pacific Residence and One Manchester Place, as well as the Newtown School of Excellence. — V.M.P. Galang

Pie and sisterhood

WAITRESS stars Joanna Ampil (center), Bituin Escalante (L), and Maronne Cruz.

“FULL OF chocolates and strawberries” is how award-winning actress Joanna Ampil described her character Jenna in the upcoming musical Waitress, as if she were a pie flavor.
Waitress makes its debut in Manila on Nov. 9 at the Carlos P. Romulo Auditorium, RCBC Plaza, Makati City.
Based on Adrienne Shelly’s film of the same name, then adapted into a Broadway musical (book by Jessie Nelson), Waitress follows Jenna Hunterson, a waitress at Joe’s Pie Diner. With the support of her two friends Dawn and Becky, she finds comfort in baking as an escape from her mundane life and the stress brought by her abusive marriage to husband Earl. After learning that she is pregnant, Jenna begins an affair with her new gynecologist, Dr. Jim Pomatter. When she learns about a pie baking contest, Jenna hopes that winning it will afford her the opportunity to start a new life.
According to the actors in Atlantis Theatrical Entertainment Group’s production, the pie is a special cast member. The various pie flavors baked in the story represent significant circumstances and events throughout the show.
“It’s (baking) their escapism from their mundane life. And also, she (Jenna) grew up baking. Her mom taught her how to bake. She has a lot of joy when it comes to baking. She remembers her mother who gave her a lot of love. So, I think that’s why it’s a huge part of her life,” Ms. Ampil said of the significance of baking in the story, during the press conference on Oct. 18 at Discovery Suites in Ortigas.
For Ms. Ampil, the role of Jenna is by far her most challenging role, citing that it is “physically, vocally, and emotionally demanding.”
“I’m constantly onstage. I’m never off… It’s such a huge undertaking for me, but it’s so exciting,” she told members of the press.
“There is more pressure when you perform for a Filipino audience because people are so talented here and they (the audience) know the sound they want to hear. And there are such good mimics here that they usually try to look for that particular sound that they’ve heard from somewhere. That’s the pressure performing for a Filipino audience,” said Ms. Ampil.
“But then again, they’re perfectionist. So, you tend to perform better, and you strive harder because you cannot have any mistakes. Filipinos can be quite critical. It’s not such a bad thing, it’s just that they are of a particular standard,” she added.
With music and lyrics by Sara Bareilles, the musical is directed by Bobby Garcia and choreographed by Cecile Martinez.
“The music of this story is what a lot of people would consider more pop… Despite the pop underbelly, the stories that the lyrics tell are so hard-hitting deep and they really tug at your heartstrings,” Nino Alejandro, who plays Ogie, Dawn’s boyfriend, said about the music.
The story focuses on women empowerment.
“The show shows women empowerment through the power of sisterhood,” Maronne Cruz who plays Dawn, told the press. “These women find strength not just by coming into terms with their own issues by themselves, but they also gain their strength from their friends. These women support each other wholeheartedly no matter what their circumstances are and that’s an extremely empowering part of the show.”
Bituin Escalante, who plays Becky, said that women need the company of other women to lift each other up.
“It’s generations and generations of the struggle of women. You can’t go at it alone. You really need the woman next to you, the woman in the next room, the nurse who comes in who is really there no matter how harsh you can get. She knows what a woman feels. We only have each other,” she said.
“Jenna’s journey is about finding her strength. Finding it back and getting it back,” Ms. Ampil said.
Also in the cast are Bibo Reyes as Dr. Pomatter, George Schulze as Earl, Dean Rosen as Cal, and Steven Conde as Joe. Luigi Quesada, Gerhard Krysstopher, Luis Marcelo, Emeline Celis Guinid, Teetin Villanueva, Sarah Facuri, and Jillian Ita-as are the ensemble.
Waitress will run from Nov. 9 to Dec. 2 at the Carlos P. Romulo Auditorium, RCBC Plaza, Makati. For details visit Atlantis Theatrical Entertainment Group at www.facebook.com/ATEGasia/. For tickets, contact Ticketworld at (632) 891-9999 or visit www.ticketworld.com.ph. — Michelle Anne P. Soliman

Total Solar expands in Philippines with Gaisano deal

A UNIT of French oil company Total S.A. has secured contracts to install solar energy systems on the rooftop of four Gaisano malls in Luzon and the Visayas with a total capacity of 1.66 megawatts (MW).
In a statement, the subsidiary Total Solar SEA said it had locked in contracts with Gaisano Capital, the entity behind the malls, for its first project in the Philippines.
Total Solar said the installation can generate around 2,257.3 MW-hour in a year. The malls in Binangonan, Calapan, Masbate and San Carlos will have an installed capacity of 536 kilowatts peak (kWp), 268 kWp, 375.2 kWp, and 482.4 kWp, respectively.
The project is expected to help Gaisano Capital cut its carbon dioxide emissions by 1.25 million tons and reduce its expenses.
“Construction of the facilities will begin in November and will be online early 2019,” Total Solar said.
The solar energy developer said it complies with the highest environmental, health, and safety requirements. It said the facilities will use only Tier 1 components and work with the most experienced local contractors in the solar photovoltaic (PV) industry.
Total Solar develops, owns and maintains solar PV rooftop and behind-the-meter facilities that are contracted either through a power purchase agreement or lease agreement, depending on a country’s legal environment.
The company said it is one with Total (Philippines) Corp. “in its commitment to becoming the responsible energy major, catering to the energy needs of the country and its communities.”
Total Philippines is the local subsidiary of Total S.A. and is engaged in the marketing of fuels, lubricants and special fluids. It operates a network of more than 420 service stations in Luzon and the Visayas.
Through Total Solar, the French oil firm as an integrated operator is present across the photovoltaic solar value chain, including cell manufacturing and solar power storage to electricity sales.
Total S.A. said it has been committed to advancing solar energy for more than 30 years. The company also develops and operates large solar sites and decentralized systems at homes, plants and offices. — Victor V. Saulon

Paris auction house ‘would love it’ if Banksy pulls another stunt


PARIS — The first auction house to sell prints by Banksy since THAT auction two weeks ago does not anticipate another stunt like the one that shredded half a picture moments after the hammer fell. But, hey, if something were to happen? Great!
“Are we expecting it? Not really. Perhaps we are hoping for it,” said auctioneer Arnaud Oliveux of Artcurial auction house in Paris, which is selling three Banksy prints on Oct. 24. “I would love it if something happens.”
The British artist has done more to cultivate his mystique in the two weeks since a print of one of his best known works, Girl With a Balloon, slid half way through a shredder embedded in its frame moments after it was sold at Sotheby’s in London.
Banksy released a new video that suggested the partial-destruction was a malfunction: it showed an identical print in the same frame being entirely shredded, with the caption “in rehearsals it worked every time.”
Oliveux said if Banksy was planning another stunt for the next auction, it probably wouldn’t involve a secret shredder.
“Banksy never repeats himself. Here, you see the frame, there’s nothing at all hidden in the structure. But perhaps we could imagine a different stunt.”
The auction house said it cannot predict how high the bidding will go for its three prints, but it expects the extra attention from Banksy’s last stunt will have an impact on prices. All the seats are taken at the auction and the international media are showing up.
Bidding on a print of Stop and Search, depicting Dorothy from The Wizard of Oz being searched by a policeman, starts at just €30,000 ($35,000), a bargain compared to the million pounds Girl With a Balloon fetched moments before it self-destructed. — Reuters

MRP to proceed with tender offer

MELCO Resorts and Entertainment (Philippines) Corp. (MRP) will proceed with its tender offer at the end of October, but will keep its offer price at P7.25 apiece.
The listed operator of the City of Dreams Manila said in a disclosure on Tuesday that the tender offer by its majority shareholder, MCO (Philippines) Investments Limited, will start on Oct. 31. The tender offer will run for a total of 20 business days.
MCO Investments aims to buy back up to 1.57 billion common shares in MRP from the public, in a bid to increase its shareholdings in the company. It currently holds 72.54% of the outstanding MRP shares.
“The Bidder believes the Tender Offer gives existing shareholders of MRP the opportunity to sell their MRP Shares, in cash, at a premium to the current trading price of the MRP Shares,” the company said.
The tender offer price represents around a 14% premium over MRP shares’ three-month volume weighted average price as of Sept. 7, the last trading day before the company announced its voluntary delisting plan.
The offer price is also 2.4% higher than MRP’s closing price of P7.08 each on Tuesday. This is 0.98% or seven centavos lower from the previous session’s close.
“On the other hand, the Tender Offer would also allow the Bidder to increase and consolidate its interests in MRP to better support and facilitate MRP’s future business plans,” MRP added.
The company reiterated that the tender offer will no longer be part of its plan to apply for voluntary delisting at the Philippine Stock Exchange, following complaints from a number of investors on the pricing and other investment decisions.
“The change of purpose for the Tender Offer, which led to the withdrawal of the petition to delist by MRP on Oct. 19 is aimed at alleviating certain investors’ concerns that the potential delisting may exert undue pressure on their decision process related to the acceptance of the Tender Offer,” MRP said.
The company explained that shareholders should not be pressured into accepting the tender offer, given that it has withdrawn its petition for voluntary delisting at the PSE last week.
“Investors are therefore assured that they are free to conduct their evaluations and arrive at a decision whether to tender their shares at their absolute discretions,” the company said.
It also noted that investors who do not agree with MRP’s tender offer price are not obligated to participate in the offer.
Amid the change in purpose for the conduct of the tender offer, analysts pointed out that this could indicate a shift in MRP’s strategy to exit the bourse. Should investors participate in the tender offer, this could bring down MRP’s public float to less than 10% from the current 27.05%, making it eligible for involuntary delisting procedures. — Arra B. Francia

A pity to throw it away: insurer stores damaged art in Germany


COLOGNE — What happens to artworks which are too badly damaged to be restored once the insurer has paid out the claim?
Up to 300 of them — scratched, torn or punctured works by well-known artists including Gerhard Richter, Christo and Giorgio de Chirico — are stored in an AXA warehouse near the western German city of Cologne.
One of the world’s biggest art insurers, AXA receives claims every year for damage to paintings, sculptures, and drawings. Some 80% of them can be restored.
The rest, which either cannot be or are to expensive to be repaired come to this warehouse.
“We store artworks, objects and collectors items by notable artists for which we have compensated our customers, we take ownership of them and keep them for the future,” said Kai Kuklinski, head of AXA Art Insurance.
“The main goal is to keep this art as it is too much of a pity to throw it away,” he said.
AXA gives some pieces, which include paintings, collectors items, and antiquities, to research projects. Some are auctioned for charity and others kept, in case they can be repaired later, once restoration techniques have improved.
“Otherwise, we keep things for many many years, up to decades, in our warehouse,” said Kuklinksi.
Works in the Cologne warehouse include a damaged offset print of Christo’s Wrapped Reichstag.
Another is Black Red Gold, a painting by Gerhard Richter which was damaged because of the way it was hung.
One of the most unusual items is a painting by Giorgio de Chirico which was almost destroyed when a wrecking ball from next door ripped through it as it hung on the wall of a house. — Reuters

SEC to release sustainability reporting rules before yearend

By Arra B. Francia, Reporter
THE country’s bourse operator and corporate regulator are placing the spotlight on sustainability reporting for listed firms, recognizing the need to disclose non-financial information to better aid the public in making investment decisions.
The Securities and Exchange Commission (SEC) on Tuesday said it plans to release the guidelines for sustainability reporting and the template for publicly listed companies by the end of the year. The initial draft was released for public comment last July.
The SEC described sustainability reporting, otherwise known as environmental, social, and governance (ESG) reporting, as an “organization’s practice of reporting publicly on its significant economic, environmental and/or social impacts, in accordance with globally accepted standards.”
The guidelines will require companies to disclose information related to their resource management, ecosystem and biodiversity, environmental impacts, employee management, and supply chain management, among others.
SEC Chairperson Emilio B. Aquino said this will guide investors in choosing which companies to invest in.
“Small investors can be able to invest in very good companies, not only in terms of returns, but also sustainability advocacy,” Mr. Aquino told reporters on the sidelines of the 5th SEC-PSE Corporate Governance Forum at the Philippine International Convention Center.
The Philippine Stock Exchange (PSE) welcomed this move, while also highlighting its efforts to encourage sustainability reporting among listed firms.
“Sustainability reporting guidelines is an important milestone for the capital market. It will assist in the realization of our collective goal of creating platforms for disclosure of non-financial information that will enable stockholders to have access to a company’s ESG performance thereby enabling them to make better investment decisions,” PSE President and Chief Executive Officer Ramon S. Monzon said in a speech during the forum.
Mr. Monzon said the exchange is studying the possibility of requiring ESG reporting as part of its listing rules.
PSE Chief Operating Officer Roel A. Refran said they target to implement this by 2019, as they are currently building up awareness for sustainability practices.
“(This) should be implemented by 2019. We’re doing now the dialogue with asset managers, we’re seeing how we can rationalize these indices. This is very relevant as we look at sectors, at certain considerations,” Mr. Refran told reporters on the sidelines of the forum.
Part of the PSE’s initiatives is also its application to be a member of the Sustainable Stock Exchanges (SSE) initiative established by the United Nations in 2009. The group currently has 75 members, five of which are part of the Association of Southeast Asian Nations.
“The SSE initiative is a peer-to-peer learning platform, for exploring how exchanges in collaboration with investors, regulators, and companies can promote responsible investment for sustainable development… PSE aims to learn from the experiences of our partner exchanges in the region,” Mr. Monzon said.
In the near future, Mr. Monzon said they are also aspiring to create a sustainability related index once ESG reporting in the country has improved.
“We have to prepare the ground work for the establishment of a sustainability-related index some time in the near future…The Philippine market is expected to improve its governance rules to promote transparency and disclosure of ESG factors, which in turn will hopefully result to thematic indices in line with ESG standards,” Mr. Monzon said.

Trumperte: comedy is political


MELANIA and Donald Trump will be visiting the Philippines on Oct. 26 and 27.
Well, this is partly fake news, because the catch is that actor Jon Santos will be impersonating them — and many more.
A timely comedic piece, Trumperte, written and acted by Mr. Santos, promises to be a two-day laugh fest.
The performances will be at the PETA Theater in Quezon City.
Mr. Santos will parody political personalities from here and abroad including Mocha Uson and President Rodrigo Duterte, alongside the iconic personalities whom Mr. Santos has been impersonating all these years like actress-politician Vilma Santos and former First Lady and shoe collector Imelda Marcos.
During the preview on Oct. 8, Mr. Santos declared that he is an “equal-opportunity offender.” He said, “I’ve been Erap in front of Erap, I’ve been GMA in front of GMA, I’ve been Kris in front of Kris [Aquino],” adding that there’s definitely tension when he and his subjects are in the same room, but he’s glad that the subjects of his jokes understand the nature of his shows.
Mr. Santos added that the coming senatorial elections in 2019 gave him opportunity to develop new material. He said parts of Trumperte will include jokes about some of the “senatoriables.”
Trumperte is part of PETA’s “Stage of the Nation” season where the lineup of performances are all shows that reflect current politics.
“Napaka-encouraging that we all laugh at the same places. There’s hope na alam pa rin ang tama at mali (there is hope that people still know right and wrong). Nakaka-encourage na people support live comedy as a form of healing. They dress up, they buy tickets, and they brave the traffic to bond with kindred spirits,” said Mr. Santos during “PETA’s… Stage of the Nation” launch on Sept. 21. (READ: “PETA’s State of the Nation”)
Mr. Santos co-wrote Trumperte together with Enrico Santos and Joel Mercado, while Michael Williams will direct the show.
“My lookout is just the front. Kasi voice niya (Santos) ’yung material, eh ’di ko naman siya pwede diktahan ng joke (Because his material is his voice, I cannot dictate his jokes),” said Mr. Williams of his role as the show’s director.
Trumperte tickets are currently on sale at TicketWorld. — Nickky Faustine P. de Guzman

Gov’t rejects all bids for reissued seven-year bonds as yields go up

By Karl Angelo N. Vidal, Reporter
THE GOVERNMENT rejected all bids for the reissued seven-year Treasury bonds (T-bonds) it offered on Tuesday as bids came in higher than expected amid increased demand due to maturing state debt.
The Treasury did not accept any tenders for its P15-billion offer of reissued seven-year bonds with a remaining life of six years and five months yesterday.
This, even as total offers placed by banks and other financial institutions amounted to P24.456 billion, well above the amount the Treasury intended to borrow.
Had the government proceeded with a full award, the debt papers, which carry a 5.75% coupon, could have fetched an average rate of 8.284%, 119.9 basis points higher than the 7.085% average fetched when the papers were last sold in September.
At the secondary market, prior to the auction, the debt notes were quoted at 7.5546%.
At the close of the trading yesterday, the seven-year securities rallied to fetch a lower yield of 7.9482%.
Deputy Treasurer Erwin D. Sta. Ana said the government opted to reject all bids for the seven-year papers as offers from investors were “unreasonably” high.
“We looked at the last time we issued this security as well as the [five-year bonds]. There is really a huge pickup from the last auction rates, so the committee decided to reject at this time,” Mr. Sta. Ana told reporters following the auction on Tuesday.
He added that demand from banks and other financial institutions rose as the Treasury is paying P11 billion worth of maturing debt this week, adding liquidity to the market.
“Possible, dealers are actually looking for ways to invest those P11 billion.”
Mr. Sta. Ana noted that going back to government debt “is already an interesting proposition” for investors given the rising interest rates.
Meanwhile, a bond trader said offers placed by investors were higher than the expected 8-8.25% range.
“Market players are playing defensive amid lack of firm leads in the market,” the trader said in a phone interview.
“Investors prefer placing their funds in the shorter-tenor [securities] such as the three-year [bonds] and Treasury bills (T-bills) rather than the longer-term papers such as this one.”
To compensate for the previous rejections the Treasury has made, the official said the Bureau of the Treasury is looking at other fund-raising options such as offshore offerings, retail bonds, as well as floating-rate notes.
A floating-rate note, or floater, is a debt instrument that carries a varying interest rate, depending on a benchmark. However, floaters yield lower returns compared with fixed-rate papers of the same maturity date.
“The floaters would really benefit the banks more because that would actually give them some protection with respect to rises and changes in interest rates because the benchmark has a reset so that would serve as a protection for them,” Mr. Sta. Ana explained.
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 T-bonds.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product.

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