Gov’t makes full award of fresh seven-year bonds

THE GOVERNMENT made a full award of the new Treasury bonds (T-bonds) it auctioned off on Tuesday amid strong demand after a previous bond issue matured, and amid signs of slowing inflation.

The Bureau of the Treasury (BTr) made a full PHP 25-billion award of the fresh seven-year bonds it offered on Tuesday as total bids reached PHP 61.847 billion, or more than twice the amount on the auction block.

The bonds were awarded at a coupon rate of 6%. Accepted yields ranged from 5.975% to 6.06% for an average of 6.012%.

The coupon fetched for the tenor was 0.8 basis point (bp) lower than the 6.008% quoted for the seven-year bond at the secondary market prior to the auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

However, the coupon was 3.5 bps higher than the 5.965% fetched for seven-year bonds first issued in October 2022 being traded at the secondary market.

The government made a full award of its fresh T-bond offer as the coupon fetched was lower than the secondary market yield for the seven-year tenor, National Treasurer Rosalia V. de Leon said in a Viber message to reporters after the auction.

There was strong demand for the offer following the maturity of seven-year bonds last week, a trader said in a Viber message.

The bonds were fully awarded as yields were low amid lower global crude oil prices recently and the peso’s recovery, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Both of these would lead to further rollback in local fuel pump prices, help reduce prices, and overall inflation,” Mr. Ricafort said.

Headline inflation slowed to 7.6% in March from 8.6% in February, bringing the first-quarter average to 8.3%, still well above the central bank’s full-year forecast of 6% and the 2-4% target.

Tuesday’s auction was the Treasury’s last offering of T-bonds for April. It raised PHP 94.475 billion out of the PHP 100-billion program for the long-tenored papers as it made full awards at three out of four of the month’s auctions.

With the BTr raising PHP 46.447 billion via its Treasury bill auctions versus the PHP 60-billion plan, the government was able to borrow PHP 140.922 billion out of its PHP 160-billion domestic program for April.

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