20-year government bonds oversubscribed

THE government has opened its tap facility to accommodate the excessive bids for its new 20- year Treasury bond offering.

At Tuesday’s auction, the Bureau of Treasury raised P9-billion worth of 2032 IOUS with a coupon rate of 5.875 percent, 212.5 basis points below the last time the same note was traded. During the sovereign’s debt exchange in July last year, the government was able to swap its shorterdated obligations with 20-year instruments at the rate of 8 percent.

At the secondary market, the done deal rate for the similar note was last quoted at 5.98 percent or 10.5 higher than the government’s auction.

Volume for the 20-year securities reached P41.475 billion or more than four times oversubscribed than the original issue size. “We had a nobrainer auction today [ Tuesday],” National Treasurer Roberto Tan said after the auction.

“We will open an over-the-counter facility to accommodate the excessive bids from investors. We will decide as to how much later today [Tuesday]” he added. Tan attributed the favorable rate and strong demand to investors’ continued bias for longer-dated obligations.

“The benign inflation outlook for the year by the Bangko Sentral [ ng Pilipinas] and the expectation that international interest rates would be quite low this year further fueled the market’s appetite for longer-dated investment instruments,” he said.

At present, baseline inflation forecast for 2012 is at 3.1 percent or 41 basis points lower from 3.51 percent during the December 5 meeting, while for 2013 the forecast is at 3.4 percent or 28 basis points higher from 3.12 percent.

Both 2012 and 2013 forecasts are well within the fixed medium-term inflation target of 3 percent to 5 percent. For the week, the government’s due and demandable debt stood at P2 billion.

RTB issuance

Meanwhile, Tan said that the government may launch its Retail Treasury bond (RTB) offering within February.

“We are looking at longer-dated obligations. Probably, we would sell at least 10-year, 15-year and 20-year RTBS. But of course, it would still depend on the market’s preference,” he said.

“We are going to do it [RTB issuance] soon,” Tan added.

RTBS are long- dated government IOUS that are meant for the retail market. However, institutional investors as well as government financial institutions are not barred from taking part.

Under an RTB offering, an individual could buy debt papers for as low as P5,000, a far cry from the P20 million minimum set for the regular bonds.