THE Bureau of the Treasury (BTr) has awarded the full P15 billion on offer for the re-issued three-year Treasury bond (T-bond) during its auction on Wednesday, with the auction committee seeing sustained market appetite for the three-year security.
National Treasurer Rosalia V. de Leon said the auction committee of the BTr sees investor preference remaining within the three-year debt paper, pointing out that the tenor is a sweet spot for the market.
“[The] three years, we see that there’s continued appetite in the market because it’s shorter than the front end of the curve also, so that’s a sweet spot for investors. So we decided to do a full award today,” de Leon explained.
The re-issued three-year IOU was awarded a full P15 billion with bids for the security reaching as much as P26.287 billion and the average annual rate settling at 5.136 percent.
Compared to the previous auction rate of 4.703 percent for the security, the current rate posted an increase of 43.3 basis points.
Asked why the auction committee decided to fully award the government security even at a higher rate, de Leon said the market may be placing more buffers to weather shocks.
“They provided for additional buffer, in case the market would also move…. Unlike in the Treasury bills where it’s short, here you still have the duration of three years, they would still provide that cushion, for purposes of avoiding market-to-market losses also,” she added.
She explained that there is a very liquid market at the moment, which can be partially attributed to the maturities paid off by the government in terms of IOUs this month. Last August 18 a redemption of about P86 billion was recorded, and around P9 billion will be maturing this week.
“First of all, there’s liquidity in the market and then inflows coming from offshore also. There’s liquidity, but the preference continues to be on the shorter part of the curve,” she said.