BTr partially awards ₧20.1B in new 7-year Treasury bonds

THE Bureau of the Treasury partially awarded P20.1 billion out of its P35 billion in new 7-year Treasury bonds (T-bonds) as the market anchors on expectations monetary authorities would hike interest rates this week.

The debt paper fetched a coupon rate of 6.5 percent, up by 31.1 basis points from the secondary-market benchmark rate of 6.189 percent for the same tenor.

Had the Treasury decided to fully award bids, the coupon rate would have soared to 7 percent, higher by 81.1 basis points from the comparable secondary market benchmark rate.

National Treasurer Rosalia V. De Leon attributed the higher rate to investors “taking cue” that the Monetary Board will raise policy rates in its meeting on Thursday.

“At the same time, the [US Federal Reserve] is similarly expected to follow up with another rate lift in their next meeting,” De Leon said.

Still, total bids for the security amounted to P46.9 billion, making the auction oversubscribed.

BSP Governor Benjamin E. Diokno said last month monetary authorities may discuss a rate hike in their June meeting on the steady inflation spikes. Diokno also said early May that inflation is expected to remain elevated in the coming months due to the continued volatility in global oil and non-oil prices and the commodities market, reflecting the largely continued impact of Russia’s invasion of Ukraine and constricted supply chain.

Inflation in April hit 4.9 percent, the highest since the 5.2 percent recorded in December 2018.

The BSP has kept the key interest rate at a record-low of 2 percent since November 2020 to keep the cost of borrowing manageable, especially for businesses adversely affected by intermittent lockdown measures.

For this month, the Treasury is targeting to raise P200 billion from the domestic debt market. Since the start of this month, the Treasury has so far sold P97.8 billion in government securities.

As of end-March, the national government’s outstanding debt has hit a new record-high of P12.68 trillion as borrowings continued to pile up.

The national government’s debt-to-GDP ratio has also risen to a 17-year-high at 63.5 percent, above the internationally-recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines. This is also the highest since the country’s debt-to-GDP ratio hit 65.7 percent in 2005 under the Arroyo administration.

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