Gov’t makes full award of bonds

THE GOVERNMENT yesterday made a full award of reissued five-year Treasury bonds (Tbonds) amid strong appetite for debt notes at the short end of the curve, even as rates requested by banks continued to climb amid lingering uncertainties offshore.

The Bureau of the Treasury raised P15 billion as planned on Tuesday from its offer of the reissued five-year bonds with a remaining life of four years and 11 months. The securities were met with strong demand as total tenders reached P38.994 billion, more than twice the government’s offer.

The average rate of the debt papers was quoted at 4.03%, 15.4 basis points ( bps) higher than the 3.876% average seen when the papers were originally auctioned off last Jan. 24 and also a touch higher than its 4% coupon rate. The government also made a full award of the fresh five-year Tbonds at the January auction.

Deputy Treasurer Erwin D. Sta. Ana said that even though the average yield for the five-year papers rose yesterday, the rates sought by banks were still within secondary market rates, which was why the Treasury decided on a full award.

“It’s (the offer) more than twoand-a-half times oversubscribed. And the awarded rates are within benchmarks, it’s a very healthy turnout for the auction,” he told reporters after the exercise.

At the secondary market, the five-year bonds were quoted at 4.3107% before the auction. At the close of trading, the papers fetch a slightly higher yield of 4.3125%.

Asked if yields sought by investors were expected, Mr. Sta. Ana said, “It’s not really higher than at the secondary market levels. We think that it’s just about aligning with the current levels.”

Also, despite higher yields sought by investors, demand for the offer was present, with Mr. Sta. Ana saying that investor appetite is currently biased in favor of shorter-termed securities due to external uncertainties.

“So I think the three- and fiveyear tenors...actually match the demand from the market,” he added.

“Domestically, we don’t see any major cause of uncertainty but since we also keep track of what’s happening externally and as it affects the domestic rates, then you could say we have to be very vigilant about watching what’s happening outside,” Mr. Sta. Ana said.

Sought for comment, a bond trader said by phone after Tuessource:

day’s auction that rates were higher compared to previous auctions “because of expectations of a rate hike [ by the US Federal Reserve] in March.”

“Even though it’s not yet confirmed — there’s only a possibility of a rate hike — there are higher expectations now that the Fed could raise rates, and of course the peso is now above the P50-per-dollar level,” the trader said.

The bond trader also attributed the auction result to “supply risk,” with the government’s T-bonds and Treasury bills auctions now held on a weekly basis and also amid market chatter about a retail bond auction as early as next month.