Gov’t fully awards reissued seven-year bonds

The government made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday at a higher average rate after inflation picked up in February.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned via the reissued seven-year bonds it offered on Tuesday as total bids reached PHP 50.062 billion, or almost twice the amount on the auction block.

The bonds, which have a remaining life of six years and 10 months, were awarded at an average rate of 6.27%, with accepted yields ranging from 6.198% to 6.345%.

The average rate of the reissued bonds rose by 17.6 basis points (bps) from the 6.094% quoted for the papers when they were first offered on Jan. 16. It was likewise 14.5 bps above the 6.125% coupon for the series.

The yield also was 8.2 bps above the 6.188% seen for the same bond series and 3.3 bps higher than the 6.237% quoted for the seven-year bond at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

The T-bonds fetched a higher average rate after headline inflation quickened in February, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The higher auction rates today reflected the stronger-than-expected Philippine headline inflation for February 2024,” a trader likewise said in an e-mail on Tuesday.

Headline inflation accelerated to 3.4% in February from 2.8% in January, the Philippine Statistics Authority reported on Tuesday. Still, the consumer price index (CPI) was much slower than the 8.6% print in the same month a year ago.

Last month’s inflation print was above the 3% median estimate in a BusinessWorld poll of 16 analysts conducted last week, but was within the Bangko Sentral ng Pilipinas’ (BSP) 2.8-3.6% forecast for the month.

This also marked the first time that headline inflation picked up month on month since September 2023.

For the first two months, the CPI averaged 3.1%, within the BSP’s 2-4% annual target.

The BTr is looking to raise PHP 180 billion from the domestic market this month, or PHP 60 billion from 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 5.1% of gross domestic product this year. — A.M.C. Sy