Treasury auction marked by demand for long tenors

THE Bureau of the Treasury fully awarded P35 billion in new 3.5-year Treasury Bonds (T-bonds) as strong demand for longer tenors continued on Tuesday.

Attracting total bids amounting to P106.3 billion, the bonds were more than thrice oversubscribed.

Due to overwhelming demand for the tenor, the coupon rate settled at 5.25 percent, lower than the comparable secondary market rates of 5.363 percent for the security itself and 5.489 percent for the 4-year tenor.

National Treasurer Rosalia V. De Leon attributed the strong demand to the redemption of maturing debt papers.

“Impressive auction results with strong demand coupled by lower rates versus secondary level compared with similar tenor,” De Leon said. “P37 billion in redemption also found a home in today’s offering.”

To take advantage of the overflowing demand, the Treasurer said they opened the tap facility window for another P10 billion offering.

In recent auctions, investors have been seeking higher yields as Philippine and American monetary officials have been raising rates to tame inflation.

Locally, Inflation hit a three-year-high in June at 6.1 percent, bringing the year-to-date figure to 4.4 percent. This is beyond the original target band for inflation by the Bangko Sentral ng Pilipinas at 2 percent to 4 percent. For this month, the Treasury is aiming to borrow P215 billion through the local debt market next month. Of the total, 140 billion in Treasury bonds (T-Bonds) and another P75 billion Treasury bills (T-bills) will be offered.

Since the start of the auction this week, the Treasury has raised P50 billion.

As of end-May, the national government’s outstanding debt dipped to P12.5 trillion from a record high of P12.76 trillion as of end-April due to its repayment of a P300-billion short-term, zero-interest loan from BSP.

The national government’s debt-to-GDP ratio has also risen to a 17-year-high at 63.5 percent, above the internationally recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines. It is also the highest since the country’s debt-to-GDP ratio hit 65.7 percent in 2005 under the Arroyo administration.