7-year Treasury bonds fetch 7% rate

MANILA, Philippines - The Bureau of the Treasury (BTr) settled yesterday for a partial award of its seven-year Treasury bonds (T-bonds) to prevent the coupon rate from rising beyond the prevailing market rate.

The paper fetched a coupon rate of seven percent as the auction committee awarded P8.210 billion worth of the paper out of total tenders of P14.197 billion.

Had the committee settled for a full P8.5 billion award, the paper would have fetched a coupon rate of 7.125 percent which Deputy National Treasurer Eduardo Mendiola said was “unreasonable.”

“We can’t accept higher than seven percent because the rate in the secondary market is seven percent,” Mendiola told reporters after the auction.

He said the auction committee was “surprised” with the behavior of the market. “Maybe they are not so interested in the seven-year tenor,” Mendiola said.

Yesterday’s auction marked the Treasury’s last auction for the first quarter of the year.

While the final figures are not yet available, Mendiola said the committee has completed its financing requirements for the first quarter of the year through the auction of Treasury bills (T-bills) and bonds and over-the-counter sale.

In the first three months of the year, the government had programmed to issue P110.5 billion worth of T-bills and bonds.

Mendiola said that while the Treasury rejected some bids during the quarter, it also sold debt papers through its over-the-counter facility, offsetting some of the rejections.

For the second quarter, the government has a borrowing program of P107 billion, lower than the first quarter program.

Officials said this is to make room for the planned retail treasury bonds for overseas Filipino workers (OFWs).

Mendiola said the RTB sale would likely happen in the last week of April or after the scheduled financial literacy briefings for OFWs in the second and third week of next month.

The briefings will be held in some parts of Europe such as Italy and Spain, in the US, Middle East and Asia including Hong Kong. 

The government is eyeing to sell $500 million to $1 billion in bonds, 20 percent of which would be for retail investors and 80 percent for institutional lenders.

To be considered retail, the amount can be anywhere from $100 to $100,000.

Overseas Filipinos who would be investing in the paper are exempt from paying the 20-percent tax on interest income, Mendiola said.