THE GOVERNMENT partially awarded the reissued 20-year Treasury bonds (T-bonds) it offered on Tuesday as rates declined on strong demand amid upcoming maturities of past issuances.
The Bureau of the Treasury (BTr) raised just P22.969 billion from its offer of 20-year papers on Tuesday, less than the programmed P35 billion, even as total bids reached P65.514 billion.
The bonds, which have a remaining life of four years and nine months, were awarded at rates ranging from 6.475% to 6.625%, bringing the average to 6.568%, down by 56.3 basis points (bps) from the 7.131% quoted for the papers when they were last offered on Nov. 8. The average rate was also 149.4 bps below the issue’s 8.625% coupon.
This was likewise 102.75 bps lower than the 7.5955% quoted for the same bond series and 6.27 bps below the 6.6307% yield for the five-year tenor at the secondary market prior to the auction, based on PHP Bloomberg Valuation Service Reference Rates data from the BTr.
National Treasurer Rosalia V. de Leon said in a Viber message to reporters that the bond offer was partially awarded as rates “aggressively declined” amid liquidity set to be released due to issuances maturing next week.
“We took advantage to further compress rates close to the secondary level of [the issuance],” Ms. De Leon said.
She added that the market also priced in signals of slower rate hikes by both the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).
A trader said the bids seen on Tuesday were within their expected range.
“Overall, still a good auction for BTr as they were able to award lower compared to last time they issued this series,” the trader added in a text message.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text that investors continued to ask for high yields amid the strengthening peso and easing global oil prices, even as secondary market yields are on the decline amid expectations of dovish monetary policy.
“The peso exchange rate is still among the strongest in nearly three months, together with lower global crude oil prices, could help ease inflationary pressures,” Mr. Ricafort added.
The Fed is seen to slow its pace of tightening after four consecutive 75-bp increases as minutes of its Nov. 1-2 meeting showed more policy makers are leaning towards smaller hikes. The market is now expecting a dovish 50-bp hike at the Fed’s Dec. 13-14 meeting,
The US central bank has raised rates by 375 bps since March to tame soaring inflation.
Back home, the BSP has raised borrowing costs by 300 bps since May to rein in rising prices and keep in step with the Fed. It is set to hold its last policy meeting for this year on Dec. 15.
BSP Governor Felipe M. Medalla on Tuesday ruled out further outsized or off-cycle increases, but said they will need to keep on raising borrowing costs as the Fed’s own tightening cycle continues.
Meanwhile, oil rebounded on Tuesday after falling to more than 11-month lows in the previous session, Reuters reported.
Brent crude futures advanced $1.81 or 2.2% and traded at $85.00 a barrel at 0446 GMT. US West Texas Intermediate crude futures rose $1.37 or 1.8% to $78.61 a barrel.
The BTr wants to raise P135 billion from the domestic market this month, or P30 billion through Treasury bills and P105 billion from T-bonds.
The government borrows from local and external sources to help plug a budget deficit capped at 7.6% of gross domestic product this year. — Luisa Maria Jacinta C. Jocson
