Reissued T-bonds fully awarded at higher rate on Fed hike fears
THE GOVERNMENT made a full award of Treasury bonds (T-bonds) it auctioned off on Wednesday even as the average yield went up on concerns over the US Federal Reserve’s planned rate hikes.
The Bureau of the Treasury (BTr) borrowed P35 billion as planned via the reissued five-year securities it auctioned off on Wednesday as total tenders reached P60.66 billion, making the offer more than 1.5 times oversubscribed.
The debt papers, which have a remaining life of four years and two months, were awarded at an average rate of 4.089%, up by 7.7 basis points (bps) from the 4.012% quoted during the previous successful offer on Jan. 11.
The average yield fetched for the debt papers was also higher than the 3.7848% quoted for the four-year tenor, the closest benchmark to the remaining life of the reissued papers, at the secondary market prior to the auction, based on the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.
National Treasurer Rosalia V. de Leon in a Viber message to reporters said the T-bond’s average rate remained within secondary market levels despite the hawkish tone from the US Federal Reserve.
The market expects “cooling inflation and continued supportive monetary stance,” she said.
Meanwhile, a bond trader said the yield fetched for the reissued T-bond was within market expectations even as it was higher than the last dealt level of 4.05% on Wednesday morning.
“It was expected though as market wants higher yield as a reaction to FOMC’s (Federal Open Market Committee) hawkish comments.”
US Federal Reserve Chairman Jerome H. Powell last week said the central bank may raise interest rates starting in March, although the pace of later rate hikes is yet to be decided, Reuters reported.
Meanwhile, a BusinessWorld poll of 16 analysts last week yielded a median estimate of 3% for January inflation.
If that projection is realized, this would be the second consecutive month that inflation fell within the 2-4% target band set by the Bangko Sentral ng Pilipinas. This would also be lower than the 3.6% in December.
The BTr plans to raise P200 billion from the domestic market this month, or P60 billion via Treasury bills and P140 billion from T-bonds.
The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — J.P. Ibañez with Reuters
