Investors swamp T-bond auctions

MANILA, Philippines – A few weeks before the elections, bond investors continued to swamp government debt papers with the latest offering yesterday attracting more than twice the amount being sold.

The seven-year Treasury bond (T-bond) fetched a coupon rate of 3.5 percent, similar to the rate during its last auction in March 2014, the Bureau of the Treasury said in a statement.

Total tenders reached P54.94 billion, more than twice the P25-billion offer.

“The auction set a coupon rate if 3.5 percent which aligns with other existing tenor benchmarks and is backed by healthy market demand,” the Treasury said.

Sought for comment, a bond trader said the demand reflects investors seeking to replace maturing obligations this month as well as their confidence on the Philippine economy.

“It was very well participated in by investors. This continues to reflect the demand for reinvestment requirement of the market,” the trader said in a phone interview.

“Some end-users are trying to deploy risk,” she added. Based on her calculations, a total of P94 billion debt papers are maturing by April 25.

Interestingly, the trader said there remains no political risk even amid the nearing presidential elections on May 9.

Investors usually shun uncertainties like a change in government. As a result, investment instruments like T-bonds end up with less demand and higher interest that the government needs to pay.

“Most fund managers still believe in the Philippines as a whole and the Philippine fundamentals, which I believe can transcend candidates and personalities,” she said.

Emilio Neri Jr., lead economist at Bank of the Philippine Islands, explained optimism could be based on the strength of the economy.

“The economy is in a much better shape in 2016 that most if not all of the other presidential elections,” Neri said in a separate phone interview.

“Maybe the market could actually be looking at other elements other than political uncertainties that they are willing to bet on the long term,” he added.

The economy likely grew faster in the first quarter than the five-percent recorded in the same period a year ago, the National Economic and Development Authority has said.