Gov’t raises P15B from seven-year bonds at auction
THE GOVERNMENT raised another P15 billion from its auction of Treasury bonds (T-bonds) yesterday, and decided to shore up more funds by opening a tap facility for the fourth straight week.
The Bureau of the Treasury (BTr) made a full award for reissued seven-year papers on Tuesday, which have a remaining life of six years and four months. Demand for the notes remained strong at P29.92 billion, double the amount the state planned to raise.
The long-term papers also saw a modest increase in rates. This week’s auction fetched a 7.09% average, 11.6 basis points higher than the 6.974% yield fetched when the seven-year notes were offered two weeks ago. It also settled slightly higher than the 7.016% market rate yesterday, based on the PHP Bloomberg Valuation Service Reference Rates.
These IOUs originally carried a 5.75% coupon when they were first offered in April. This week, market players asked for returns ranging from 7-7.145%.
National Treasurer Rosalia V. de Leon said the sustained appetite for the Tbonds come as market players are taking
advantage of current spreads, as they see interest rates declining in 2019.
“They are really locking in the rates, anticipating that next year, eventually it will go down as inflation is tapering off,” Ms. De Leon told reporters after the offering.
Domestic inflation eased to 6% in November from a nineyear peak of 6.7% in September and October, affirming views that the pace of price increases will be on a downtrend to eventually return to the government’s 2-4% target.
Ms. De Leon added that global trade tensions as well as a “less hawkish” tone from the US Federal Reserve are bolstering views that yields will fall next year.
With this, the Treasury decided to open the tap facility from 2-4 p.m. yesterday to take advantage of the oversubscriptions for the offering.
This is the fourth straight time a tap window was opened, with the Treasury raising P53.136 billion from the facility in the past three weeks. Raising more funds from the tap facility may allow the Treasury to advance its fundraising activities and avoid higher interest rates in future note offerings.
The 10 banks and investment firms that have been named as market makers by the Treasury can use the tap facility. The Treasury was set to accept bids that match the average rate fetched during the afternoon auction and award the fresh batch of papers at 5 p.m.
Minimum placements are set at P10 million, while the bureau can decide to raise the volume of additional T-bonds it will accept.
“There’s a good chance BTr can sell at least P10 billion,” a bond trader said when sought for comment on the tap facility, noting strong demand for the papers just before inflation declines further.
The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in Treasury bonds. This is part of the P888.23-billion borrowing plan this year from local and foreign sources to fund the budget deficit and support increased government spending.
Meanwhile, Ms. De Leon said the government is “in no rush” to issue a fresh batch of dollar bonds to foreign investors, at a time of “aggravated” trade tensions between the US and China following the arrest of a top official of Huawei Technologies Corp. in Canada, which has shocked business executives from the Mainland and could see retaliation.