Gov’t fully awards f ive-year bonds as rate declines on strong demand

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Wednesday as its average rate fell on the back of robust demand.

The Bureau of the Treasury (BTr) raised P35 billion as planned via the reissued five-year Tbonds, which have a remaining life of four years and seven months.

The notes attracted total tenders worth P76.167 billion on Wednesday or more than twice as much as the initial offer and slightly higher than the P75.72 billion in bids seen when the bond series was last offered on May 6.

The reissued five-year bonds fetched an average rate of 2.746%, dropping by 54.9 basis points from the 3.295% logged in the previous auction.

This was also lower than the 2.951% quoted for the tenor at the secondary market prior to the auction.

To accommodate excess demand and take advantage of the low rate fetched on Wednesday, the Treasury opened its tap facility to raise another P5 billion via the five-year bonds.

National Treasurer Rosalia V. de Leon said clearer signals from the US central bank on their plan to cut asset purchases helped pull down local bond yields.

“[Federal Reserve Chairman Jerome H.] Powell’s remarks during the Jackson Hole provided guidance that taper will be decoupled from rate liftoff,” Ms. De Leon told reporters in a Viber message on Wednesday.

Mr. Powell acknowledged in his speech at the Jackson Hole conference that tapering could begin this year, but added the central bank is in no hurry to raise interest rates, Reuters reported.

“The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff,” Mr. Powell said in his speech posted on the Fed’s website.

Meanwhile, a bond trader said the five-year bond auction received strong demand from the local market “due to a lack of supply in this space for the past month.”

The Treasury is looking to raise P250 billion from the local market this month: P75 billion via weekly offers of T-bills and P175 billion from weekly auctions of T-bonds.

The government wants to borrow P3 trillion from domestic and external sources this year to help fund a budget deficit seen to hit 9.3% of gross domestic product. —