BTr fully awards T-bonds at slightly higher rates

THE GOVERNMENT made a full award of the reissued 20-year Treasury bonds (T-bonds) it auctioned off on Tuesday as the market awaits the policy decisions of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury (BTr) raised PHP 25 billion as planned from the reissued 20-year bonds it offered on Tuesday as total bids reached PHP 34.412 billion.

The bonds, which have a remaining life of 19 years and eight months, were awarded at an average rate of 6.631%, with accepted yields ranging from 6.5% to 6.745%.

The average rate of the 20-year bond was 10.60 basis points (bps) higher than the 6.525% quoted for the same series when it was last offered on January 17 but 149.40 bps below the 8.125% coupon for the issue.

This was also 8 bps higher than the 6.551% quoted for the 20-year bond and 8.20 bps above the 6.549% seen for the same bond series at the secondary market prior to the auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The Auction Committee decided to fully award the reissued 20-year Treasury Bonds (FXTN 20-25) at today’s auction. With 19 years and 8 months to maturity, the reissued T-bonds fetched an average rate of 6.631%, lower than the original coupon rate of 8.125% set on its original issuance in November 2022,” the BTr said in a statement on Tuesday.

“The auction was 1.4 times oversubscribed with total tenders reaching PHP 34.4 billion. With its decision, the Committee raised the full program of P25 billion, bringing the total outstanding volume for the series to PHP 101.6 billion,” it added.

The Treasury made a full award of its T-bond offer at a higher average rate as the market was waiting for the result of the Fed and BSP’s policy meetings this week, a trader said by phone.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message that the average rate of the bond series was slightly higher “ahead of the Fed and BSP rate-setting meetings later this week, as markets priced in a possible +0.25 Fed rate hike on March 22, 2023 that could be matched locally on the following day.”

The Fed will hold its second policy meeting for the year on March 21-22. Markets are pricing in an increase of just 25 bps from the Fed following the failures of Silicon Valley Bank and Signature Bank.

The US central bank hiked its target interest rate by 25 bps at its January 31 to February 1 meeting to a range between 4.5% and 4.75%.

Since March 2022, the Fed has raised rates by a total of 450 bps.

Meanwhile, the BSP’s policy-setting Monetary Board will meet on March 23.

A BusinessWorld poll held last week showed 12 out of 14 analysts see the Monetary Board hiking rates by 25 bps on Thursday amid concerns over elevated inflation and the fallout from bank failures in the United States.   

The Philippine central bank last month raised benchmark interest rates by 50 bps for a second straight meeting, bringing its policy rate to 6%. The BSP has increased borrowing costs by 400 bps since May 2022.

The BTr wants to borrow PHP 200 billion from the domestic market this month, or PHP 75 billion via Treasury bills and PHP 125 billion via T-bonds.

The government taps local and external sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy