THE Bureau of the Treasury sold P35 billion in reissued 25-year Treasury bonds (T-bonds) on Tuesday as investors remain attracted to longer tenors.
National Treasurer Rosalia V. De Leon said the investors were once again drawn into the longer tenors due to yield pick-up.
“Rate lower than secondary [as] market did not ask for any maturity or illiquidity premium,” De Leon told reporters.
Given the auction results, De Leon said they will continue to offer debt papers with long tenors under the government’s domestic borrowing program for August.
Bids for the debt paper reached P94 billion, making the auction more than twice oversubscribed.
Strong demand for the longer tenor was evident, pushing the average even lower than those from the secondary market benchmark rates.
With a remaining term of 13 years and four months to maturity, the T-bonds fetched an average rate of 6.894 percent, also lower than the original coupon rate of 8.125 percent set on its first issue in December 2010.
Likewise, this is also below the Bloomberg Valuation (BVAL) Service Reference Rates of 6.982 percent and 6.922 percent for the 15-year tenor and the security itself, respectively.
To accommodate the demand, the Treasury also decided to open the tap facility window to raise an additional P10 billion.
For this month, the government is set to borrow P200 billion from the local debt market.
As of end-May, the national government’s outstanding debt dipped to P12.5 trillion from a record-high of P12.76 trillion as of end-April due to its repayment of a P300 billion short-term, zero-interest loan from BSP.
In a bid to temper inflation which has already hit a 3-year-high of 6.1 percent in June, the Bangko Sentral ng Pilipinas (BSP) earlier surprised markets with an aggressive rate hike of 75 basis points.
Even before this off-cycle hike, the BSP has already resorted to back-to-back 25-basis point hikes in its May and June meetings.
But the BSP seems not to be done yet as its Governor Felipe Medalla earlier said they still have room to raise interest rates.
The US Federal Reserve is also set to conclude its two-day policy meeting on Wednesday as the market priced a 75-basis point rate hike.