Gov’t fully awards bonds amid strong demand

The government fully awarded the reissued seven-year Treasury bonds (T-bonds) it offered on Tuesday amid strong demand for the offer.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned from the reissued seven-year bonds it offered, with total bids reaching PHP 57.788 billion.

The bonds, which have a remaining life of six years and two months, were awarded at an average rate of 6.299%, with accepted yields ranging from 6.2% to 6.348%.

The average rate of the reissued bonds was 13.7 basis points (bps) higher than the 6.162% quoted for the papers when they were last offered on March 28.

This was also 5 bps above the 6.249% fetched for the six-year bond and 11.6 bps higher than the 6.183% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

Still, this was 70.1 bps below the 7% coupon for the bond series.

“The Auction Committee decided to fully award the reissued 7-year Treasury Bonds (FXTN 07-68) at today’s auction. With a remaining term of 6 years and 2 months, the security fetched an average rate of 6.299%, lower than the coupon rate of 7% set on its first issuance in October 2022,” the BTr said in a statement on Tuesday.

“The auction was 1.9 times oversubscribed with total tenders reaching PHP 57.8 billion. With its decision, the Committee raised the full program of PHP 30 billion, bringing the total outstanding volume for the series to PHP 121.8 billion,” it added.

The government made a full award of the T-bonds auctioned off on Tuesday on strong demand from the market as the bond series was offered for the first time in a while, a trader said by phone.

Still, the average rate was at the higher end of market estimates, the trader added.

T-bond rates rose on expectations of another rate hike from the US Federal Reserve next week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The US central bank is expected to hike rates by 25 bps in its July 25-26 meeting, but the market sees a low chance of further increases amid easing inflation in the world’s largest economy.

The Fed paused its tightening cycle in June after hiking its benchmark rate by a cumulative 500 bps to a range between 5% and 5.25%.

The US consumer price index (CPI) rose by 0.2% last month after climbing by 0.1% in May.

In the 12 months through June, the CPI climbed by 3% after the 4% increase seen in May.

Meanwhile, the US producer price index (PPI) for final demand edged up by 0.1% last month, slower than the 0.4% increase in May.

In the 12 months through June, the PPI climbed by 0.1%, also easing from the 0.9% in May.

The BTr wants to raise PHP 180 billion from the domestic market this month, or PHP 60 billion via Treasury bills and PHP 120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — AMCS