Gov’t makes full award of reissued 10-year bonds

THE GOVERNMENT made a full award of the reissued 10-year Treasury bonds (T-bonds) it auctioned off on Tuesday as its average rate was lower than secondary market levels after better-than-expected inflation data.

The Bureau of the Treasury (BTr) raised PHP 25 billion as planned from the reissued 10-year bonds it offered on Tuesday as total bids reached PHP 71.156 billion, more than twice the amount on the auction block.

The bonds, which have a remaining life of nine years and six months, were awarded at an average rate of 6.378%, with accepted yields ranging from 6.223% to 6.41%.

The average rate of the issue was 12 basis points (bps) higher than the 6.258% quoted for the series when it was last offered on February 21.

Still, this was 37.20 bps below the 6.75% coupon quoted for the series.

It was also 8.47 bps lower than the 6.4627% quoted for the 10-year bonds and 7.10 bps below the 6.449% 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 fully awarded the reissued 10-year Treasury bonds at today’s auction. With a remaining term of nine years and six months, the T-bonds (FXTN 10-69) fetched an average rate of 6.378%, lower than the original coupon rate of 6.75% set upon first issue last September 2022 and the secondary market benchmark rate,” the BTr said in a statement on Tuesday.

“The auction attracted PHP 71.2 billion in total tenders, 2.8 times the PHP 25-billion offer. With its decision, the committee raised the full program of PHP 25 billion, bringing the total outstanding volume for the series to PHP 140 billion,” it added.

A trader said in a Viber message that the Treasury made a full award of its T-bond offer as demand was strong, with a five-year bond issue maturing on Wednesday.

“Better-than-expected CPI (consumer price index) capped the yields, although the average rate was still higher compared to last auction,” the trader said.

“Market sentiment was also supported by the latest easing of the headline inflation,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Headline inflation eased for the first time in six months in February, as the rise in transport costs slowed from the month prior, the government reported on Tuesday.

Preliminary data from the Philippine Statistics Authority showed the consumer price index stood at 8.6% in February, slowing from the 14-year high of 8.7% in January. However, this was faster than the 3% print recorded in February 2022.

Last month’s inflation print was below the 8.9% median in a BusinessWorld poll conducted last week and was closer to the lower end of the 8.5-9.3% estimate of the Bangko Sentral ng Pilipinas.

However, core inflation picked up to 7.8% in February from 7.4% the previous month and 1.9% in the same month last year. This was the highest in more than 22 years or since the 8.2% recorded in December 2000.

The BTr wants to raise 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 borrows from local and external sources to finance its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy