Bond sales tepid as investors spooked by geopolitical risks

THE national government made a partial award of the reissued 20-year Treasury bonds (T-bonds) on Tuesday’s auction, raising only P16.633 billion due to high investors’ asking yields.

The Bureau of the Treasury (BTR) partially awarded the 20-year T-bonds worth P30 billion, which fetched an average rate of 7.017 percent.

The average yield fetched by the T-bonds is higher compared to the 20-year PHP BVAL yield at 6.80 percent as of April 22 as well as the 6.189 percent previous 20-year T-bond auction yield on March 19.

Data from the Treasury showed that offers made by investors for the yield ranged from a low of 6.900 percent to a high of 7.080 percent.

According to the Treasury, the auction was 1.2 times oversubscribed as the total amount tendered reached P34.9 billion, about 16 percent over the programmed amount. The Tbonds had a remaining life of 19 years and 10 months.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort pinned the increase on the 20-year T-bond average auction yield to geopolitical risks, specifically the conflict between Iran and Israel.

This “largely triggered” the average auction yield as well as the more hawkish or cautious signals by the US Federal Reserve (Fed) and local monetary authorities that reduced the odds of rate cuts for 2024, which Ricafort said could lead to “higherfor-longer” interest rates until inflation is tamed.

Last week, the government fully rejected bids for the reissued 20-year T-bonds, with the average auction yield reaching 6.987 percent had the committee approved the bids.

For April, the national government plans to borrow as much as P120 billion from the tender of T-bonds, the same as the targeted amount last month. The Treasury is scheduled to hold four auctions of T-bonds with varying tenors to raise as much as P30 billion each.

The state is also targeting to raise P195 billion in April from the combined sale of T-bonds and Treasury bills (T-bills).

The government also aims to borrow, following a 75:25 mix in favor of domestic sources, a total of P1.853 trillion from the domestic market through the sale of T-bills and T-bonds, based on state budget documents.