Gov’t makes partial award of reissued bonds at higher rate

THE GOVERNMENT partially awarded the reissued Treasury bonds (T-bonds) it offered on Tuesday as investors asked for higher yields in anticipation of the US Federal Reserve’s rate hike this week.

The Bureau of the Treasury (BTr) raised just P13.035 billion via the reissued five-year T-bonds it auctioned off on Tuesday, less than the programmed P35 billion, even as the offering attracted P35.305 billion in bids.

The debt papers, which have a remaining life of four years and 23 days, were awarded at an average rate of 4.669%, up by 58 basis points (bps) from the 4.089% quoted when the series was last offered on Feb. 3.

The average yield fetched for the debt papers was also higher than the 4.4168% 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.

Had the Treasury made a full award of its offer, the reissued bonds would have fetched an average rate of 5.015%.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters that yields bid by investors continued to rise as they remained defensive ahead of the Fed’s policy decision this week.

“Lingering concerns on higher inflation continues,” she said.

Meanwhile, a bond trader said via Viber that the yields sought by investors remained high as expected as they expect inflation to exceed the central bank’s 2-4% target anew due to rising prices of oil and other commodities.

“Of course, this is being triggered by effects of ongoing Ukraine-Russia tension, as well as the lockdown in China, which may prolong supply chain disruptions,” the trader said.

“Another thing is the FOMC (Federal Open Market Committee) meeting on Thursday, where markets are wary on how hawkish they will be given last week’s oil rally.”

Fed Chairman Jerome H. Powell previously said he is inclined to support a 0.25% rate hike at the March 15-16 FOMC meeting and is open to a more aggressive move in the future if inflation continues to rise.

Global oil prices have been surging since the Feb. 24 Russian invasion of Ukraine, raising inflation concerns here and abroad.

These concerns were exacerbated by potential supply chain disruptions after China expanded lockdown restrictions in response to an increase in coronavirus disease 2019 cases there.

The BTr wants to raise P250 billion from the domestic market this month, or P75 billion via Treasury bills and P175 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. — Jenina P. Ibañez