THE Bureau of the Treasury sold P35 billion in reissued 10-year Treasury Bonds (T-bonds) at rates lower than the benchmark secondary market’s as investors showed strong demand for the long tenor.
With a remaining life of 9 years and 10 months to maturity, the debt papers’ average yield settled at 5.813 percent.
This is lower than the original coupon rate of 7.25 percent set last June and the benchmark secondary market rates of 5.964 percent for the 10-year tenor and 5.95 percent for the security itself.
“Another impressive auction markets preference for long tenor at rates lower than secondary level even with expected rate hikes by MB [Monetary Board],” National Treasurer Rosalia V. De Leon told reporters following the auction.
Tuesday’s auction was more than thrice oversubscribed, with total bids reaching P128.8 billion.
To take advantage of the strong demand for the tenor, the Treasury also opened the tap facility window for an additional P15-billion offering.
Earlier this month, Bangko Sentral ng Pilipinas Governor Felipe M. Medalla said the July inflation print “raises the possibility of a 50 basis points rate hike rather than 25 basis points” in their policy meeting on Thursday.
Inflation in the Philippines in July hit 6.4 percent, the highest recorded since the 6.9 percent recorded for October 2018. The July rate brings the Philippines’s average inflation in the first seven months of the year to 4.7 percent. To note, the government targets inflation to range this year at a low of 2 percent to a high of 4 percent.
For this month, the Treasury is aiming to borrow P215 billion through the local debt market next month. Of the total, 140 billion in Treasury Bonds (T-Bonds) and another P75 billion worth of T-bills will be offered.
This year, the government is set to borrow a total of P2.21 trillion, of which 75 percent will be sourced locally while the remaining 25 percent will come from foreign sources.
This is lower than the government’s actual P2.55 trillion gross borrowings last year as it needed to borrow more to finance its spending requirements amid the Covid-19 pandemic.
Former President Duterte ended his term in June this year with the national government’s debt stock soaring to another record-high of P12.79 trillion.
This was more than double compared to the P5.948 trillion debt level when Duterte assumed office in mid-2016. By the end of 2019 or a few months before the COVID-19 pandemic hit the country, the national government’s debt stock was at P7.73 trillion.
The country’s debt-to-GDP ratio slightly eased to 62.1 percent in the second quarter of the year from 63.5 percent in the first quarter but remained above the internationally-recommended 60-percent threshold for a healthy economy.
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