Reissued T-bonds fetch lower rate

MANILA, Philippines — Bids for a reissued seven-year Treasury bond (T-bond) fell by about 27 percent as the easing of inflationary pressures pushed rates downward by almost 11 basis points.

In an auction yesterday, the Bureau of the Treasury raised P35 billion from the sale of the reissued T-bonds with a remaining life of six years and nine months.

Even as the auction was 1.74 times oversubscribed, bids filed declined to P61.175 billion, from P83.684 billion in the June 8 auction.

Likewise, the average rate for the seven-year T-bond slipped by 10.9 bps to 3.576 percent, from 3.685 percent in the previous auction. The debt paper has a coupon rate of 3.625 percent.

National Treasurer Rosalia de Leon said investors decided to hold off their bids on the release of inflation data that missed the market consensus. Further, she said the rate acquired from the sale of T-bonds aligned within secondary levels.

“Full award at 10.9 bps lower than previous auction, [as] bids came lower after inflation print at 4.1 percent compared to consensus of 4.3 percent and last month at 4.5 percent,” De Leon said in a text message to reporters.

She said the Treasury opened the tap facility window to auction P5 billion worth of additional issuance.

For this week, the Treasury managed to award in full all of the government securities it offered, including P15 billion in Treasury bills (T-bills) on Monday.

Inflation in June relaxed to 4.1 percent, from 4.5 percent in the previous three months, as prices of transport services slowed to 9.6 percent, from 16.5 percent in May. However, the June index jumped from the 2.5 percent recorded during the same month last year.

When the inflation rate jumps, investors demand rate increases to protect their investments from the vulnerabilities caused by price swings. Meanwhile, they allow the market to dictate the rates in times that inflation hovers within or below government target.

For July, the Treasury seeks to raise P60 billion from the sale of T-bills every Monday, and P175 billion from the auction of T-bonds every Tuesday.

The government increased its debt program to P3.02 trillion from P3 trillion last year to speed up the rollout of measures crafted for the economy to bounce back.