Treasury makes partial award for 10-year T-bonds

MANILA, Philippines – The Bureau of Treasury yesterday made a partial award of the re-issued 10-year Treasury bonds (T-bonds) amid the volatile global financial markets led by the stock market crash last Monday.

The government raised P22.18 billion out of the P25 billion offering yesterday from the 10-year debt paper which has a remaining life of nine years and eight months.

Tenders amounted to P28.08 billion, but the auction committee ended up rejecting P5.9 billion.

The 10-year T-bonds fetched a higher rate of 4.218 percent compared to the 4.1 percent offered in the secondary market. The debt papers issued on Sept. 9 last year has a coupon rate of 3.625 percent.

Had the committee made a full award, the yield of the debt papers would have gone up to 4.25 percent.

“I think it turned out quite well although we partially rejected, but I think the bids were serious bids. The reference was really market direction, as well as the demand side,” National Treasurer Roberto Tan told reporters yesterday.

Tan pointed out investor sentiment has been affected by major developments in the global financial markets in the early part of 2016.

He cited the continued normalization of interest rates in the US after the US Federal Reserve raised rates for the first time in nearly a decade last month as well as the economic slowdown in China.

“First of all the Fed decision of increasing, and then some anticipation of future Fed hikes, as communicated by the Fed. Then of course, China’s effect on the capital markets is really creating some uncertainty,” he added.

According to Tan, the rise in yields is reflective of the uncertainties in the global financial markets.

“I think for the Philippines, we have observed quite a stable behavior in the trading performance. So this is quite reflective of market concerns and price,” Tan said.

The national treasurer said authorities are closely monitoring developments as the government intends to raise funds via a global bond offer.

“Definitely these times are not the right time. So it’s probably something that we think they should monitor more closely, when we’re already prepared for a launch in the future,” he said.

He explained the government is looking at raising a maximum of $750 million in fresh funds as part of its debt liability management program.

“The Philippines overall compared to comparable economies is not as badly affected as others, including some of our neighbors. So I think gradually there will be more selectivity on the part of foreign investors, to move investments into safer grounds in emerging economies,” Tan said.