INVESTORS flocked to park their funds in the reissued seven-year Treasury bond (T-bond) with bids more than four times oversubscribed at P62.227 billion, prompting the Bureau of the Treasury (BTr) to open its tap facility anew.
National Treasurer Rosalia V. de Leon told reporters Treasury officials were “pleasantly surprised” at the turnout of the T-bonds auction on Tuesday.
“We are pleasantly surprised. We are seeing a lot now also that the preference is going into the intermediate,” de Leon said. “They are going longer because they want to lock-in the rates right now.”
The auction committee awarded the full P15 billion on offer at an average annual rate of 6.974 percent. The reissued seven-year T-bond has a remaining life of six years and four months.
The rates posted a slight increase of 11.1 basis points compared to the previous rate of 7.085 percent. The average annual rate for the IOU is also lower compared to the rates under the Bloomberg Valuation Service (BVAL) of 7.101 percent.
De Leon said the healthy demand for the security can also be attributed to expectations that inflation is now decelerating. She added there are also signs that global oil prices are stabilizing and the peso further appreciating. The healthy bid turnout pushed the BTr to open once again its tap facility.
“The expectation that the rates will be falling already given the inflation is expected to already trend downward,” de Leon said. “Now the bids are even higher than what we got last week for the five-year [T-bond], so we’ll see how much the tap [facility] will also generate.”
The tap facility was opened for the Treasury’s 10 market makers from 2 to 4 p.m. last Tuesday, with the auction ending 5 p.m. the same day. The tap facility allows Government Securities Eligible Dealers (GSEDs) to access bonds after the initial auction. The last time the Treasury decided to utilize its tap facility was in January 2017.
“We are opening the tap [facility],” she said.
Another P15 billion will be offered under the tap facility with the same annual average rate of 6.974 percent.
In December last year, the BTr named its market makers under its enhanced GSED program, with the financial institutions being selected based on their performance in the primary and secondary government security markets.
The 10 market makers are: 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.