Partial award for reissued 5-year T-bonds

MANILA, Philippines — The government yesterday snapped a three-week streak of failed biddings for Treasury bonds (T-bonds), although it only made a partial award as investors demanded yields above prevailing pricing.

The Bureau of the Treasury awarded less than two-thirds or P22.126 billion of the P35 billion in reissued five-year T-bonds, with a remaining life of four years and two months on offer.

Demand for the securities reached P58.277 billion, oversubscribing the auction by 1.66 times and beating by nearly a fourth the previous sale’s P46.648 billion.

The rate for the reissued T-bonds ballooned by 25 basis points to 4.012 percent as against its last offering in November last year. The average also exceeded by 19.3 bps the BVAL Reference Rate for four-year debt papers.

National Treasurer Rosalia de Leon said a partial award was made to reject investors who filed for yields beyond market pricing. She added investors should be reducing their rate ask by now, as inflation sank for a fourth straight month to 3.6 percent in December.

Also, De Leon said the Bangko Sentral ng Pilipinas (BSP) has never faltered in its commitment to keep monetary support in place for as long as the economy requires.

“Highest submitted rate at 4.15 percent is way above fair value for the security,” De Leon said in a text message to reporters.

“Inflation will trend downward and BSP is patiently supportive to allow the economy to recover,” she said.

De Leon said the government is assessing how the US Federal Reserve’s plan to tighten monetary policies may affect the Philippines. For now, she said the economy could take solace in BSP Governor Benjamin Diokno’s principle to retain benchmark rates at record lows to support economic recovery.

The International Monetary Fund on Monday warned that emerging markets like the Philippines should brace for impact from the looming adjustments in the US. The Fed has sped up its taper of bond purchases and looks to raise rates at least thrice this year.

“Even without the IMF warning, [we] have been mindful of Fed actions, but we take comfort in Governor Diokno’s statements of being patiently accommodative to support the recovery,” De Leon said.

Diokno vows that the withdrawal of stimulus measures will take place without a timeline to leave some room for flexibility in case the pandemic drags on.