BTr sells P7.5B of 3-year T-bonds

The Bureau of the Treasury (BTr) sold P7.5 billion worth of three-year Treasury bonds (T-bonds) in an auction yesterday.

The average rate for the paper declined to 5.389 percent from 6.875 percent, the rate of a comparable debt paper or the three-year retail treasury bonds (RTB) issued in July last year.

During yesterday’s auction, the government received total tenders amounting to P20.175 billion.

Finance Undersecretary and Acting National Treasurer Roberto Tan said the decline in the rates was within expectations as investors sought for other facilities to park their funds given the expected rate cut of the US Federal Reserve.

 “It looks like the market is awash with cash so they’re already flocking in. There’s an expectation in the reduction in US Fed Fund rate,” Tan told reporters after the auction.

“Based on our evaluation of the market, this was very much within expectations,” Tan added.

Analysts said investors expect a 50 basis point cut in US Fed rate at the end of the month, a move which may be followed by the Bangko Sentral ng Pilipinas (BSP).

Jonathan Ravelas, chief market strategist of Banco de Oro said rates in the secondary market moved down as the government expects a budget surplus for 2007 and expectations of a cut in US Fed rate.

“However, we continue to reiterate the need for sustainable revenue stream instead of relying on privatization to meet the budget target,” Ravelas said.

The government recorded a budget surplus for the first 11 months of the year of P12.7 billion, against a shortfall of P55.1 billion last year. 

The government attributed the surplus to the sale of PNOC-Energy Development Corp. (PNOC-EDC) for P58.5 billion to Red Vulcan Holdings Corp. last November.

Fiscal authorities expect a better fiscal position for 2007 due to the rosy figures as of end-November.