THE Bureau of the Treasury (BTr) awarded P20 billion for seven-year Treasury bonds (T-bonds) auctioned off on Tuesday, as strong liquidity is seen in the market.
National Treasurer Rosalia V. de Leon said there is liquidity in the local market as tenders for the T-bond amounted to P66.917 billion, more than thrice oversubscribed from the P20 billion on offer.
“So again, we see very strong participation in the auction today. We are pleased about the results 100- basis-point reduction…you see the lowering of the rates from the 7.09 percent down to 6.25 [percent],” de Leon told reporters.
In line with this, the auction committee decided to open its tap facility anew, offering P10 billion for the seven-year T-bond with a coupon rate of 6.250 percent.
The average annual rate for the security settled at 6.087 percent, a 100.30-basis-point reduction compared to the previous auction rate of 7.090 percent.
“And then we see also the bid to cover is about three times, and we still see very strong liquidity. And we are going to open the tap [facility] for additional P10 billion. It just shows that we have a very strong cash position,” she added.
The coupon rate for the T-bond of 6.250 percent was still lower than the average coupon rate of 7.09 percent, which came from the previous auction of seven-year T-bonds in December 2018.
She explained that the demand for the seven-year debt paper can be somewhat attributed to the market’s expectations of inflation reverting downward, as the Bangko Sentral ng Pilipinas (BSP) earlier said it expects inflation to fall within the band of 2-4 percent this year.
“I think there’s still their preference of the belly of the curve. At the same time, they are taking advantage of the rates right now because they see that rates will eventually taper down given that they would expect inflation to really [be] on a downtrend, to decline significantly coming from the pronouncements of the BSP [that] they see it [to] be going back to the target path of 2- 4 percent,” she said.
The tap facility is only made available to the Treasury’s 10 market makers, namely, BDO Unibank Inc., Bank of the Philippine Islands, China Banking Corp., Citibank Philippines, Development Bank of the Philippines, First Metro Investment Corp., Land Bank of the Philippines, Metropolitan Bank and Trust Co., Rizal Commercial Banking Corp. and Security Bank Corp.