Gov’t raises P10B from 10-year T-bonds

Business World - - BANKING & FINANCE - Karl An­gelo N. Vi­dal

THE GOV­ERN­MENT raised P10 bil­lion worth of reis­sued 10-year Trea­sury bonds (T-bonds) yes­ter­day as de­mand for the long-dated tenor re­cov­ered amid per­sis­tent con­cerns over in­fla­tion.

The Bu­reau of the Trea­sury made a full award of the 10-year se­cu­ri­ties it placed on the auc­tion block yes­ter­day, which have a re­main­ing life of nine years and 11 months.

Bids by banks reached P17.278 bil­lion, above the P10 bil­lion the gov­ern­ment planned to raise.

The pa­pers fetched an av­er­age yield of 6.213%, higher than the 6.184% av­er­age yield fetched dur­ing the pre­vi­ous auc­tion, but lower than the 7.1714% rate at the sec­ondary mar­ket prior to the fund-rais­ing ex­er­cise.

As trad­ing closed at the sec­ondary mar­ket, the 10-year Trea­sury bond ral­lied to fetch a lower yield of 6.2225%.

Af­ter the auc­tion, Na­tional Trea­surer Ros­alia V. De Leon told re­porters that the Trea­sury saw strong par­tic­i­pa­tion from deal­ers.

“There [ were also] de­mand com­ing from the in­sti­tu­tional in­vestors on the long end of the curve, so that’s why we see that there’s a good par­tic­i­pa­tion for this auc­tion,” Ms. De Leon said on Tues­day.

“In­sti­tu­tional in­vestors would also need to fill their re­quire­ments for the yield pickup and also for the longer ma­tu­rity so [ there is] that de­mand on the long-end of the curve.”

Ms. De Leon added that in­vestors fac­tored in con­cerns over the geopo­lit­i­cal tensions in Syria, as well as pos­si­ble new ap­point­ments in the US Fed­eral Re­serve.

Last week, the White House an­nounced that Amer­i­can, Bri­tish and French mil­i­tary forces launched more than 100 mis­siles to strike what is be­lieved to be chem­i­cal weapons fa­cil­ity fol­low­ing the sus­pected poi­son gas at­tack.

In re­sponse, Rus­sia vowed to re­spond to any at­tack on its ally, adding that the Syr­ian mil­i­tary had in­ter­cepted 71 of the mis­siles fired.

“We’ve had a lot of other con­cerns like what hap­pened in Syria, and then of course... we also see the new ap­point­ments in the Fed so [in­vestors] would have to be watch­ful in terms of what would be the pro­nounce­ments com­ing out of these new mem­bers,” Ms. De Leon added.

Pres­i­dent Don­ald. J. Trump nom­i­nated Columbia Uni­ver­sity eco­nom­ics pro­fes­sor Richard Clar­ida to be the vice-chair­man of the Fed. Mr. Trump also nom­i­nated Michelle Bow­man, a Kansas bank­ing of­fi­cial, to be a Fed board mem­ber.

The na­tional trea­surer added that the “steep­en­ing bias will con­tinue given that in­fla­tion con­cerns is a per­sis­tent is­sue for the in­vestors,” par­tic­u­larly as the Mone­tary Board meet­ing of the Bangko Sen­tral ng Pilip­inas (BSP) draws near.

In­fla­tion has been on a steady as­cent for four months, hit­ting a three-year peak of 4.3% in March un­der the 2012 base year amid ris­ing fuel prices and higher com­mod­ity costs due to the tax re­form law.

The con­tin­u­ous ac­cel­er­a­tion of in­fla­tion re­in­forced mar­ket ex­pec­ta­tions of a rate hike from the BSP within the year.

The BSP’s Mone­tary Board will meet for the third time this year on May 10.

“The trend for in­ter­est rates con­tin­ues to be higher and con­cerns re­main the same. Ex­pec­ta­tions on the in­fla­tion will re­main el­e­vated and that the gov­ern­ment will con­tinue to need fund­ing for its so­cioe­co­nomic pro­grams,” a bond trader said in a phone in­ter­view.

The trader added that de­mand seen at yes­ter­day’s auc­tion was “mostly end-user re­lated.”

The gov­ern­ment is set to raise P325 bil­lion via the do­mes­tic mar­ket this quar­ter through auc­tions of se­cu­ri­ties.

It plans to bor­row P888.23 bil­lion from lo­cal and for­eign sources this year to fund its bud­get deficit, which is capped at 3% of the coun­try’s gross do­mes­tic prod­uct.

Mean­while, Ms. De Leon clar­i­fied that a bond swap or a fresh is­suance “is not urgent” since the Trea­sury has enough funds to meet its ma­tu­ri­ties worth P130.5 bil­lion due on May 23.

“It’s not urgent that we do it by May [ be­cause] we al­ready have the re­sources to meet our ma­tu­ri­ties come May 23 and even for the other forth­com­ing ma­tu­ri­ties,” she said, adding that the bond re­demp­tion “was al­ready taken care of.”

“That P130 bil­lion has been al­ready in our hori­zon... even be­fore so we have to make sure that we con­trib­ute to the [ bond sink­ing funds] to han­dle the ma­tu­rity.” •

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