Gov’t raises PHP 235B in new money from FXTNs

The government has raised PHP 235 billion in fresh funds from its offering of new fixed rate Treasury notes (FXTNs), closing the public offer period a day after the rate-setting auction due to strong demand.

“Apart from supporting the National Government’s financing requirements, this 10-year FXTN issuance underscores our commitment to establishing liquid benchmark securities that strengthen secondary market activity,” National Treasurer Sharon P. Almanza said in a statement on Thursday.

“The pricing of the FXTN, which came in close to the 10-year Bloomberg Valuation (BVAL) rate, reflects our disciplined and prudent approach to fiscal management.”

The BTr’s offer period was cut short from the original three-day window of Feb. 18 to 20 after reaching the funding target.

The government had raised an additional PHP 127.93 billion from the tap facility it opened on Wednesday from the PHP 107.07 billion earlier raised from the rate-setting auction.

“Please be informed that the BTr will no longer accept bids for the new money component of the FXTN 10-74 amidst the strong demand received during the first day of the public offer period,” the Treasury said in a separate memo.

Total tenders at the tap facility reached PHP 135.8 billion, underscoring enduring robust demand as the offering was timed a day ahead of the anticipated policy rate cut by the Bangko Sentral ng Pilipinas (BSP).

The BSP on Thursday lowered its benchmark policy rate by 25 basis points (bps) to 4.25% as widely expected.

At the rate-setting auction, total tenders for the paper reached PHP 328.467 billion. The new Treasury bonds (T-bonds) fetched a coupon rate of 5.925%, resulting in an average rate of 5.893%. Accepted bid yields ranged from 5.75% to 5.928%.

In April last year, the government raised PHP 300 billion via new 10-year benchmark notes, above the PHP 30-billion program, with PHP 135 billion initially raised from the rate-setting auction.

While the sale of the FXTN 10-74 has been concluded, the BTr kept the exchange program open for holders of securities maturing on April 8, Sept. 7, Sept. 20, Oct. 20, and Jan. 4, 2027.

The exchange program will be open until Feb. 20 unless ended earlier by the BTr.

“Total volume awarded is a bit small, likely due to the offering being closed early. Around PHP 20 billion more could be raised from the exchange program,” a trader said in a text message.

Another trader said in a text message that the total amount raised from the FXTN offer, including the exchange program, could be close to PHP 300 billion.

“(The) result proved there is appetite for duration, not only because of policy rate forecast, but more on the negative growth outlook which investors really see from the ground,” the trader said.

On the other hand, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the total amount raised is unlikely to breach PHP 300 billion.

Ms. Almanza previously said the BTr is aiming to raise at least PHP 200 billion from the issuance but noted the total will also depend on the demand from the exchange program.

The government aims to raise PHP 308 billion from the domestic market this month, or PHP 108 billion via T-bills and up to PHP 200 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy, Reporter