Reissued T-bonds sold out

MANILA, Philippines — Reissued seven-year Treasury bonds (T-bonds) yesterday fetched lower rates as investors swarmed the last auction of the national government for the year.

During yesterday’s auction, the Bureau of the Treasury (BTr) fully awarded P30 billion worth of securities with a remaining life span of six years and four months.

Rates averaged at 2.791 percent, 194.1 basis points lower compared to the 4.732 percent recorded the last time the bureau offered seven-year bonds on Jan. 21.

It was likewise lower than the secondary market rate for the seven-year debt papers, which settled at 2.817 percent the previous day.

The auction was almost 2.5 times oversubscribed, with total tenders amounting to P70.455 billion.

Sought for comment, a bond trader said rates stood below secondary market rates amid strong demand from investors, brought about by the ample liquidity in the financial system.

National Treasurer Rosalia de Leon also said the last auction for the year was swamped by investors with preference for securities maturing in the medium-term.

“We saw interest shift to belly of curve for yield pick-up as government securities auction wrapped up for the year,” she said.

The strong demand from the market prompted the BTr to open the tap facility for 10-year bonds, with an additional volume of P10 billion.

As the BTr’s auctions came to a close this year, De Leon noted that raising funds from the domestic market had been challenging amid the coronavirus pandemic.

“Higher domestic funding presented a big challenge. However, supportive monetary policies, notably from policy rate and RRR (reserve requirement ratio) reductions, infused needed liquidity and checked unwanted steepening of yield curves,” De Leon said.

The Philippines ramped up its borrowings to plug the deficit in the budget, which is expected to reach 7.6 percent of gross domestic product (GDP) this year amid weak revenue generation and higher spending requirements.

From January to October, the government’s gross financing has already reached P2.835 trillion, accounting for 95 percent of the P3 trillion program.  The bulk or P2.26 trillion of the amount came from domestic lenders, while P574.43 billion was sourced from foreign creditors.

As a result, the Philippines’ debt pile hit P10.03 trillion in October, nearly 30   percent higher that the P7.73 trillion recorded at the end of 2019.

By the end of this year, the Philippines’ outstanding debt is seen to hit P10.16 trillion, before further increasing to P11.98 trillion in 2021. These would translate to a debt-to-gross domestic product ratio of 53.9 percent for 2020 and 58.1 percent for 2021.