Gov’t to offer longer bond tenors

The government on Wednesday revised its borrowing program for March to offer longer Treasury bond (T-bond) tenors.

The Bureau of the Treasury (BTr) is now looking to raise PHP 30 billion from seven-year T-bonds on March 5, via 10-year papers on March 12, through 20-year bonds on March 19, and from six-year debt on March 26.

It previously planned to raise PHP 30 billion from three-year T-bonds on March 5, via five-year papers on March 12, from seven-year bonds on March 19, and through 10-year securities on March 26.

“The changes involved longer tenors, which is the preferred strategy to secure more long-term funding and give greater flexibility for the National Government to have more long-term maturities and better spread over maturities and prevent bunching up,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The government’s record issuance of five-year retail Treasury bonds (RTBs) also allow it to lengthen its debt maturities, Mr. Ricafort said.

The BTr has likely raised most of its funding requirements through the RTB offering, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. added in a Viber message.

“As is, it has already affected March rates since there will be less bond supply versus demand next month,” Mr. Neri said.

The government raised a record PHP 584.86 billion from its offering of five-year retail bonds, exceeding the PHP 400-billion target mentioned by BTr Officer-in-Charge Sharon P. Almanza during the Feb. 13 rate-setting auction.

The government initially raised PHP 212.719 billion from the RTB 30 during the rate-setting auction.

The BTr borrowed an additional PHP 372.14 billion during the nine-day public offer period. Of this amount, the government raised PHP 243.45 billion from the bond switch program, while PHP 128.69 billion came from “new money.”

The five-year RTBs fetched a coupon rate of 6.25% and were issued on Wednesday.

Meanwhile, the BTr may have adjusted its offerings for next month after it saw high demand for its 20-year T-bond auction on Tuesday, a trader said by phone.

The Treasury raised PHP 30 billion as planned from the fresh 20-year bonds it auctioned off on Tuesday as total bids reached PHP 91.423 billion, or more than thrice the amount on offer.

“Longer tenored bonds will look more attractive for investors at high interest rates, who may no longer see these when the BSP (Bangko Sentral ng Pilipinas) starts cutting rates soon,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion added, noting that liquidity could also increase next month amid maturing issuances.

The BTr is looking to raise a total of PHP 180 billion from the domestic market in March, or PHP 60 billion from Treasury bills and PHP 120 billion via T-bonds.

The government’s borrowing program for this year is set at PHP 2.4 trillion, with PHP 1.85 trillion to be raised from the domestic market and PHP 606.85 billion from foreign sources.

It borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year. — Aaron Michael C. Sy