BTr changes tenor of P7-B T-bonds

MANILA, Philippines - The Bureau of the Treasury (BTr) has changed the tenor of the P7 billion worth of Treasury bonds (T Bonds) which it plans to sell in today’s auction.

In a memorandum issued by Deputy Treasurer Eduardo Mendiola to all eligible government securities dealers, the Treasury said the bureau would re-issue seven-year T-bonds instead of the 10-year paper as originally planned.

The bonds, originally issued on April 26, 2012 and which will be sold in an auction today will mature on April 19, 2012.

The decision to change the tenor of the paper largely stemmed from supply and demand dynamics in the market. The Treasury already reduced its T-bond offer to P7 billion per auction instead of P9 billion during the first quarter of the year.

Some investors also prefer to park their funds in shorter-dated papers, as seen in the results of the last T-bond auction.

Last May 22, the government auction committee had to reject all bids for re-issued 2026 Treasury bonds after banks submitted high bids.

The debt papers were originally 20-year papers maturing on December 2026. Bids ranged from 5.750 percent to 6.750 percent before the Treasury withdrew its offer.

The Treasury originally planned to sell P9 billion but tenders only reached P7.560 billion, an indication of the market’s lack of interest in the 15-year paper. In the secondary market, the 15-year paper ranged from 5.38 percent to 5.5 percent.

Had the Treasury opted for a full award, the average rate of the re-issued paper would have risen to 6.082 percent, above secondary market rates.

T-bonds are long-term debt papers offered by the government to investors seeking viable facilities where they can park their funds.

Officials have said that market investors are probably on the sidelines, waiting for better developments abroad.

Globally, there are concerns in the Eurozone area.

Locally, there’s less reason for investors to be jittery.

The government achieved a budget surplus of P31.024 billion in April, the highest monthly surplus recorded since the P54.1 billion surplus posted in November 2007. The April surplus is higher than the P26.258-billion surplus recorded a year ago.

The government relies on local and foreign borrowing to fund its budget deficit, which is expected to hit roughly P280 billion this year. Last year, the budget gap hit P197.8 billion, lower than the original program of P300 billion set for 2011.