Fresh three-year bonds met with strong demand
THE GOVERNMENT yesterday fully awarded fresh three-year Treasury bonds (T-bonds) after the market swarmed the offer amid liquidity in the system, leading the Bureau of the Treasury (BTr) to open a tap facility today to accommodate more investors.
At its first auction for the year, the government raised P15 billion as planned from its offer of threeyear bonds maturing on Jan. 12, 2020.
Total tenders reached P37.238 billion, more than twice the government’s offer.
The debt papers were quoted at 3.364%, 19.5 basis points ( bps) higher than the 3.169% average rate fetched for T- bonds of the same tenor awarded at an Oct. 20, 2015 auction.
During the 2015 auction, the government partially awarded the re- issued 2018 debt notes with a remaining life of two years and seven months.
The coupon rate for the fresh issuance was lower than the 3.4060% quoted for the threeyear bonds at noon time yesterday before the auction.
At the close of trading at the secondary market yesterday, the bonds fetched a slightly lower yield of 3.4043%.
“The auction went very well, [it saw] very good demand, very auspicious for the year. Very good pricing also, so we fully awarded [the offer]. [The bids were] very much within the acceptance range that we had internally,” National Treasurer Roberto B. Tan told reporters after the auction.
“I think markets [ are] resettling [and] yields are going down compared to last month and the quarter before. So we are hoping for the best for this year in terms of normalizing our auction and other capital marker activities,” he said.
Due to the market’s strong demand for the debt papers, Mr. Tan said the Treasury will be extending the sale of the bonds today through its tap facility. The facility will be open until this afternoon.
“[ W]e opened the tap for those who would like to participate… for those who’d like to buy more,” he said.
Asked what the ceiling is for its offer under the tap facility, Mr. Tan said: “I understand [the ceiling is] up to double.”
MARKET ‘SURPRISED’
A bond trader interviewed by phone after Tuesday’s exercise said yesterday’s offering “was a very healthy auction” given strong demand seen from banks for the papers.
“The demand was there and the award rate was at the lower end of market expectations... Some banks and institutions also needed to replenish their holdings at the start of the year,” the trader said.
However, the trader noted that the government’s decision to extend the sale surprised the market.
“What surprised us was that there will be a tap auction [today] that kept some bidders jittery,” the trader said.
The trader explained that some market players were jittery because “initially after the auction, they rallied for five minutes for other securities…[ and] the rally was erased because of the tap facility.”
“Some took it as an interpretation of additional supply, so market players are now on the sidelines,” the trader noted.
The government last opened a tap facility to extend its offer beyond the regular auction proper after its Jan. 5, 2012 auction of reissued seven-year T-bonds, where it saw tenders reach P31.205 billion, way above its P9-billion offer.
The government plans to borrow up to P180 billion from the domestic market this quarter through offerings of P90 billion worth of both Treasury bills and T-bonds to fund its fiscal deficit.