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Reissued 7-year T-bonds fetches P30 billion in auction

Bureau of the Treasury building in Intramuros, Manila
Bureau of the Treasury building in Intramuros, Manila

THE Bureau of the Treasury (BTr) fully awarded P30-billion in reissued 7-year Treasury Bonds (T-bonds) despite investors’ inflation concerns that fueled the spike in rates.

With a remaining term of 6 years and 1 month, the reissued T-bonds fetched an average rate of 3.732 percent, a 101.3-basis-point jump from 2.719 percent in the previous auction in January this year.

National Treasurer Rosalia V. De Leon said the uptick in rates is already “expected as secondary levels climbed in tandem with inflation, higher oil prices and US Treasuries; with optimism on stimulus package.”

Following US Senate’s passage of a $1.9-trillion stimulus package over the weekend, the benchmark 10-year US Treasury yield rose to about 1.6 percent on Monday.

Nonetheless, the local T-bond auction was oversubscribed as the tenor attracted total tenders of P50.2 billion, way above the P30-billion offer.

The full award brought the total outstanding volume for the series to P174.9 billion.

Concerns over inflation brewed as the February figure hit 4.7 percent. Monetary authorities sought to calm the market by saying the spike is supply-driven, temporary and may ease in the coming months.

While some analysts view inflation as helping the fiscal position, concerns are also being raised on government’s debt  as the Duterte administration posted a record-high outstanding debt of P9.795 trillion on an annual basis and a 14-year-high debt-to-GDP ratio of P54.5 percent in 2020. This came a year after the country recorded an outstanding debt level of P7.73 trillion as it snatched a historic low debt-to-GDP ratio of 39.6 percent.

The national government’s full-year budget deficit last year also soared to a new record-high at P1.37 trillion, marking the first time since 1986 that it breached the trillion-mark.

As a percentage of gross domestic product, the government’s full-year 2020 budget deficit also reached an unprecedented 7.63 percent, even eclipsing the 5.02 percent recorded in 2002.

The Treasury said the wider fiscal gap in 2020 resulted from ramped-up state spending against the pandemic despite reduced tax revenue collections.

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