T-bond rates move up

The government decided yesterday to fully award reissued three-year Treasury bonds despite higher rates amid continuing concerns of a high inflationary environment.

During yesterday’s auction, the Bureau of the Treasury fully awarded P10 billion worth of T-bonds with a remaining life span of two years and nine months amid strong market demand.

The securities fetched an average rate of 4.632 percent, 37.6 basis points higher than the 4.256 percent recorded the previous auction in January.

This is also slightly higher than the secondary market rate for the same securities, which settled at 4.5838 percent the afternoon before the auction closed.

The auction was met with high demand, with total tenders amounting to P20 billion, twice the original volume.

National Treasurer Rosalia de Leon said the auction committee decided on a full award given that rates fetched by the securities was “within expectations.”

She said the average rate of 4.632 percent, despite being higher than the previous auction, is only about five basis points higher than the secondary market rates.

“I think three years is a happy spot for the market given the offering today and the bids submitted so we made a full award,” De Leon added.

She said the results of the auction also continue to reflect the market’s continued preference for the shorter end of the curve.

However, she said there are still persistent uncertainties in the market, particularly in the domestic inflation for March which will be announced tomorrow.

A local bond trader agreed with De Leon, saying the average rate for the three-year debt notes was within expectations, despite being higher than the rates fetched during the previous auction.

The trader said the increase was as expected due to supply risks, as well as market concerns over inflation.

To recall, the Treasury said earlier it intends to float P325 billion in Tbonds and T-bills in the second quarter of the year, higher than the P240 billion it programmed the previous quarter.

Due to these concerns, the trader said the high demand for three-year securities was not a surprise given that it has the shortest tenor among the government’s T-bond offerings for the next three months.