Gov’t makes partial award of new 13-year bonds

THE GOVERNMENT made a partial award of the new Treasury bonds (T-bonds) it auctioned off on Tuesday as investors continued to ask for higher yields amid rising benchmark borrowing costs.

The Bureau of the Treasury (BTr) raised just PHP 19.475 billion from the fresh 13-year bonds it offered on Tuesday out of the PHP 25-billion program, even as total bids reached PHP 48.769 billion.

The bonds were awarded at a coupon rate of 6.25%. Accepted yields ranged from 6.1% to 6.35% for an average of 6.24%.

The coupon fetched for the tenor was 3.10 basis points (bps) lower than the 6.281% quoted for the 13-year tenor at the secondary market prior to the auction, based on PHP Bloomberg Valuation (BVAL) Service Reference Rates data provided by the Treasury.

However, the coupon was 0.1 bp higher than the 6.249% fetched for 25-year bonds maturing in 2025 being traded at the secondary market.

The BTr partially awarded the fresh 13-year bonds as they want to align rates with secondary market levels, National Treasurer Rosalia V. de Leon said in a Viber message to reporters after the auction.

“The 13-year T-bond average auction yield of 6.24% and coupon of 6.25% similar to the comparable 12-year PHP BVAL at 6.2552% as of April 17, 2023, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The market continued to ask for higher returns to match rising benchmark borrowing costs, which led to the partial award, a trader said in a Viber message.

“The 6.25% coupon is good for the government as that lowers their borrowing cost, but at the 13-year tenor, that may be a stretch for some investors,” the trader said.

The Bangko Sentral ng Pilipinas (BSP) last month hiked borrowing costs by 25 bps to help bring down elevated inflation, bringing the rate on its overnight reverse repurchase facility or its policy rate to 6.25%.

Since May 2022, the central bank raised benchmark rates by a total of 425 bps.

Its next policy meeting is on May 18.

Mr. Ricafort added that the partial award came as rates rose amid lower global crude oil prices.

Brent crude futures fell USD 1.55 or 1.8% to USD 84.76 a barrel, while US West Texas Intermediate crude dropped USD 1.69 or 2.1% to USD 80.83 a barrel.

Investors also wanted higher rates after the peso returned to the P56 level against the dollar on Tuesday, he said.

The peso opened Tuesday’s trading session at PHP 56 per dollar.

“However, these are offset by large amount of maturing Treasury bonds later this week as some of these maturing funds would search for reinvestment opportunities,” Mr. Ricafort said.

The BTr wants to raise PHP 160 billion from the domestic market this month, or PHP 60 billion via Treasury bills and PHP 100 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. — By A.M.C. Sy