Treasury ending year with two bond issues

MANILA, Philippines – The government is closing its local fund raising activity this year with back-to-back bond issuances to ensure better terms ahead of the expected interest rate hike in the US.

In an announcement on its website, the Bureau of Treasury said the offering of four-year Treasury bonds to investors “will be moved” earlier to Dec. 6 from Dec. 13, a day after the agency floats three tenors of shorter-termed Treasury bills. Normally, the government only issues one debt paper every two weeks.

“Dec. 13 is the date of the most-awaited Fed meeting,” National Treasurer Roberto Tan said.

“We think that participating government security dealers and other market participants would be distracted and unfocused in their submissions so we moved the T-bond auction,” he said.

US Fed chair Janet Yellen is expected to lead the policy-making Federal Open Market Committee (FOMC) in raising rates, exactly a year after the US delivered its first hike in nine years.

FOMC will meet from Dec. 13 to 14 to set policy. The T-bond auction will be the government’s last domestic borrowing for 2016.

BPI lead economist Emilio Neri Jr. said despite the early issue, government securities are still likely to fetch higher rates.

“They will very likely be much higher than the last auction. It may be good timing though as market rates have declined from last week’s level,” Neri said.

Tan declined to comment on how he expects interest rates to move.

Security Bank Corp. senior vice president for Treasury Andre Ibarra III said demand for both issuances would still be healthy even if investors “have already priced in” a Fed hike.

“The papers cater to different clients. Yes, this is the first time that we would see a back-to-back issuance since normally we have one or two-week gap, but I don’t see it as a problem,” Ibarra said.