Government fully allocates reissued Treasury bonds
The GOVERNMENT has granted a full allotment of the reissued Treasury Bonds (T-bonds) he offst Tuesday because the rate sought for the tenor was generally consistent with returns on the secondary market.
The Treasury Office (BTr) raised P35 billion as planned via the reissued 25-year T bonds which it auctioned off Tuesday. The offIt was almost twice oversubscribed, with offers reaching 61.914 billion pesos.
The 25-year bonds, which have a residual maturity of 19 years and three months, reached an average rate of 5.084%, down 25.7 basis points (bps) from the 5.341% cited in the last successful offer of papers at age 20, which was November 25, 2019.
This rate was, however, higher than the coupon of 4.625% quoted when the 25-year bonds were first issued on September 9, 2015.
Before Tuesday’s auction, on the secondary market, the 25-year paper was quoted at 4.9323%, while the 20-year maturity reached a rate of 4.9373%, based on benchmark rates. PHL Bloomberg assessment published on the Philippine Dealing System website.
National Treasurer Rosalia V. de Leon said the government has fully awarded her offer 25-year papers, because the average rate obtained on Tuesday was aligned with secondary market yields, “generating positive real rates”.
“[We] saw a strong welcome for [the] reopening from 25-11, with request [at] 1.5 times [the] offuh, ”Ms. De Leon told reporters in a Viber post after the auction.
She said the relatively low rate obtained on long-term papers offered by the Treasury yesterday was “in line with market expectations that inflation will be brought under control next year.”
Last month, the Bangko Sentral ng Pilipinas (BSP) lowered itsflation this year at 3.9% against a previous estimate of 4.2%. This will bring inflation down to the annual target of 2-4% of the BSP.
On the other hand, the forecast for 2022 has been raised to 3% against 2.8% previously.
The BSP kept its key interest rate at an all time high for a fourth consecutive meeting on May 12 as it continues to support the economic recovery after the pandemic. The next Monetary Council policy-making meeting is scheduled for June 24.
The central bank will remain accommodative until the economic recovery is sustained, with further monetary policy adjustments likely by the second half of 2022, BSP Governor Benjamin E. Diokno said on Monday.
The economy remained in recession in the first quarter, where it contracted 4.2%. The country’s gross domestic product contracted a record 9.6% last year.
Last month, the government reduced its growth target for 2021 from 6.5-7.5% to 6-7%.
Meanwhile, a bond trader said the average bond yielded in yesterday’s auction was within the market expected range of 5% to 5.25%.
“There are certain sectors that need this type of tenor … I think the main thing to remember is that the market can absorb the supply in this space, an indication that the market is still very liquid,” said the trader.
The government wants to raise P215 billion from the local debt market in this month: P75 billion via weekly offers of treasury bills and 140 billion pesos of weekly treasury bond auctions.
It seeks to borrow 3 trillion PPPs this year from domestic and external sources to help finance a budget deficit that is expected to reach 8.9 percent of gross domestic product. – IBC