THE GOVERNMENT made a full award of the Treasury bonds (T-bonds) it offered on Tuesday at higher rates amid weak market appetite for longer tenors. The Bureau ofTHE GOVERNMENT made a full award of the Treasury bonds (T-bonds) it offered on Tuesday at higher rates amid weak market appetite for longer tenors. The Bureau of

Reissued 20-year bonds fetch higher rates on tepid demand

THE GOVERNMENT made a full award of the Treasury bonds (T-bonds) it offered on Tuesday at higher rates amid weak market appetite for longer tenors.

The Bureau of the Treasury (BTr) borrowed P30 billion as planned via the reissued 20-year bonds, with total bids reaching P41.506 billion.

This brought the outstanding volume for the bond series to P157.3 billion, the Treasury said in a statement.

The reissued bonds, which have a remaining life of seven years and two months, were awarded at an average rate of 5.934%. Accepted yields ranged from 5.88% to 5.98%.

The average rate of the reissued 20-year papers was 174.7 basis points (bps) higher than the 4.187% fetched for the series’ last award on June 29, 2021 and was likewise 230.9 bps above the 3.625% coupon for the issue.

This was also 2.6 bps above the 5.908% quoted for the seven-year debt — the benchmark tenor closest to the remaining life of the issue — but 1.5 bps lower than the 5.949% fetched for the same bond series at the secondary market before Tuesday’s auction, based on the PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

“The auction was uninspiring, with awards clearing toward the upper end of the expected yield range,” a trader said in a text message.

“The immediate market reaction was a sell-off in the secondary market, as some participants had positioned for partial bid rejections at higher yield levels given strong demand seen for other tenors as well as the announcement of dollar bond issuance.”

The BTr has seen robust demand for its recent offerings of government securities, especially those with shorter maturities.

Last week, it made a full P30-billion award of its offering of reissued seven-year bonds with a remaining life of five years and four days and even opened its tap facility, raising another P10 billion. It has also upsized its recent Treasury bill (T-bill) awards to take advantage of the strong appetite shown by the market.

Meanwhile, the Philippines on Tuesday launched a triple-tranche offering of US dollar-denominated bonds, marking its first offshore issuance for the year.

The government is looking at a benchmark size issue for each of the 5.5-, 10-, and 25-year notes it was offering, National Treasurer Sharon P. Almanza said in a Viber message. Benchmark-sized issues are typically worth at least $500 million.

Initial pricing guidance was at 70 bps above the comparable benchmark US Treasury yield for the 5.5-year tranche, T+100 bps for the 10-year tenor, and at the 5.9% area for the 25-year debt.

The notes were expected to be priced during the New York trading session overnight.

The reissued 20-year bonds fetched higher yields as players are hesitant to lock in their cash in long-term instruments amid lingering market risks, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

These risks include a weakening peso that could stoke domestic inflation in the coming months, uncertainty over the US Federal Reserve’s policy path amid an upcoming leadership change, and geopolitical concerns overseas, he said.

The BTr wants to raise P180 billion from the domestic market this month, or P110 billion via T-bills and P70 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy

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