Gov’t raises P10B from 10-year T-bonds

THE GOVERNMENT raised P10 billion worth of reissued 10-year Treasury bonds (T-bonds) Tuesday, Apr. 17 as demand for the long-dated tenor recovered amid persistent concerns over inflation.
The Bureau of the Treasury made a full award of the 10-year securities it placed on the auction block Tuesday, Apr. 17, which have a remaining life of nine years and 11 months.
Bids by banks reached P17.278 billion, above the P10 billion the government planned to raise.
The papers fetched an average yield of 6.213%, higher than the 6.184% average yield fetched during the previous auction, but lower than the 7.1714% rate at the secondary market prior to the fund-raising exercise.
As trading closed at the secondary market, the 10-year Treasury bond rallied to fetch a lower yield of 6.2225%.
After the auction, National Treasurer Rosalia V. De Leon told reporters that the Treasury saw strong participation from dealers.
“There [were also] demand coming from the institutional investors on the long end of the curve, so that’s why we see that there’s a good participation for this auction,” Ms. De Leon said on Tuesday.
“Institutional investors would also need to fill their requirements for the yield pickup and also for the longer maturity so [there is] that demand on the long-end of the curve.”
Ms. De Leon added that investors factored in concerns over the geopolitical tensions in Syria, as well as possible new appointments in the US Federal Reserve.
Last week, the White House announced that American, British and French military forces launched more than 100 missiles to strike what is believed to be chemical weapons facility following the suspected poison gas attack.
In response, Russia vowed to respond to any attack on its ally, adding that the Syrian military had intercepted 71 of the missiles fired.
“We’ve had a lot of other concerns like what happened in Syria, and then of course… we also see the new appointments in the Fed so [investors] would have to be watchful in terms of what would be the pronouncements coming out of these new members,” Ms. De Leon added.
President Donald. J. Trump nominated Columbia University economics professor Richard Clarida to be the vice-chairman of the Fed. Mr. Trump also nominated Michelle Bowman, a Kansas banking official, to be a Fed board member.
The national treasurer added that the “steepening bias will continue given that inflation concerns is a persistent issue for the investors,” particularly as the Monetary Board meeting of the Bangko Sentral ng Pilipinas (BSP) draws near.
Inflation has been on a steady ascent for four months, hitting a three-year peak of 4.3% in March under the 2012 base year amid rising fuel prices and higher commodity costs due to the tax reform law.
The continuous acceleration of inflation reinforced market expectations of a rate hike from the BSP within the year.
The BSP’s Monetary Board will meet for the third time this year on May 10.
“The trend for interest rates continues to be higher and concerns remain the same. Expectations on the inflation will remain elevated and that the government will continue to need funding for its socioeconomic programs,” a bond trader said in a phone interview.
The trader added that demand seen at Tuesday, Apr. 17 auction was “mostly end-user related.”
The government is set to raise P325 billion via the domestic market this quarter through auctions of securities.
It plans to borrow P888.23 billion from local and foreign sources this year to fund its budget deficit, which is capped at 3% of the country’s gross domestic product.
Meanwhile, Ms. De Leon clarified that a bond swap or a fresh issuance “is not urgent” since the Treasury has enough funds to meet its maturities worth P130.5 billion due on May 23.
“It’s not urgent that we do it by May [because] we already have the resources to meet our maturities come May 23 and even for the other forthcoming maturities,” she said, adding that the bond redemption “was already taken care of.”
“That P130 billion has been already in our horizon… even before so we have to make sure that we contribute to the [bond sinking funds] to handle the maturity.” — Karl Angelo N. Vidal