Gov’t makes partial award of Treasury bonds

THE GOVERNMENT yesterday made a partial award of fresh three-year Treasury bonds (Tbonds), as the Treasury tried to temper increase in rates.

At its auction on Tuesday, the Bureau of the Treasury raised just P14.891 billion out of the planned P20-billion borrowing from the fresh bonds maturing on Jan. 25, 2021.

The Treasury said the auction was met with healthy demand as total tenders reached P39.1 billion, nearly twice oversubscribed.

The three-year bonds fetched a coupon rate of 4.25%, higher than the 4.027% average rate fetched in the previous auction, as well as the 4.175% rate in the secondary market at noon time before the auction.

At the close of the secondary market trading yesterday, the bond yields ended flat at 4.175%.

Had the government made a full award of the bonds yesterday, the rate would have climbed to 4.287%.

“There would be significant increase in the rates if we have done a full award during this auction, so we decided not to moderate the increase which we think should really be at that level,” National Treasurer Rosalia V. De Leon told reporters shortly after the auction, adding that investors prefer shorter tenors.

In the previous T-bonds auction, the Treasury opted to fully reject the offers for the 10-year debt papers after fetching high rates, with the demand failing to reach the P20 billion the Treasury wanted to offer.

Ms. De Leon noted the healthy demand was driven by market players’ expectations of an interest rate hike by the US Federal Reserve, and anticipation of the monetary policy meeting of the Bangko Sentral ng Pilipinas on Feb. 8.

After the auction, a trader said the 4.25% coupon rate fell at the lower end of his expected range of 4.25-4.735%.

“However, we see that only a portion of the [P20 billion] offer was awarded. It shows that market is looking to buy short-term bonds but at a slightly higher rate,” the trader said in a text message.

The Treasury plans to auction off P120 billion worth of Treasury bills and another P120 billion worth of T-bonds in the January to March period. The P240 billion the Treasury plans to offer during the first quarter is higher than the P200 billion offered in the last quarter of 2017.

Meanwhile, Ms. De Leon said the Treasury saw a very good demand appetite for the last issuance, adding that “it was also a tough market.”

“We’ve seen that US Treasuries [were at] 2.55% when we launched, and it went as high as 2.66% when we entered the US market,” Ms. De Leon said. “Despite that, we saw the appetite is still very strong for the Philippine credit.”

Last week, the government offered $750 million worth of 10year dollar-denominated bonds, while swapping 14 of the country’s old debt papers worth $1.25 billion.

The bonds were priced at par with a coupon of 3%, lower than the initial guidance of 3.3%, and a final spread of 37.8 basis points over the US Treasury. —