T-bonds rates fall as investors swamp auction

MANILA, Philippines – The last auction of Treasury notes under the Aquino administration enjoyed more than three times the expected investor reception, pulling down rates despite concerns over global economic stability as a result of UK’s vote to leave the European Union (EU).

A total of P84.09 billion in offers were made for re-issued five-year Treasury bonds yesterday, pulling down the average rate 55.2 basis points to 2.69 percent.

The government offered P25 billion of the paper, which had a remaining life of four years and one month. It awarded as planned.

“Bids were aligned with market activity which was buoyed with expectations of unlikely further tightening from the US Fed following the Brexit scenario and its expected impact on global growth,” the Bureau of the Treasury said in a statement.

It was pertaining to last week’s historic referendum in the UK that showed 52 percent of voters favoring to leave the 28-nation EU. Global financial markets tumbled after the vote.

“The events that happened actually resulted into an analysis of growth being more sluggish and therefore, the need to tighten is not anymore that palpable,” a local bond trader said in a phone interview.

“For the Philippines, most of the factors influencing us are domestic in nature than external developments. A lot of investors are still looking for peso-denominated assets,” she said.

The bond issue bucked declining trends in the equity and foreign exchange markets yesterday.

The Philippine Stock Exchange index closed down 49 points or 0.64 percent to 7,666.69, while the peso recovered from a two-month low against the dollar to settle at 46.895:$1.

“During risk-off sentiments, investors still go to fixed income assets,” the trader said.

The government borrows from local and foreign markets to finance its budget deficit and pay existing debts. Treasury securities are issued to domestic investors.

For the next quarter, the Treasury has yet to released its borrowing program, but National Treasurer Roberto Tan was quoted as saying earlier it would likely be the same as the previous three months at P135 billion.

The programmed amount, however, was not completely utilized in the second quarter with some T-bond and Treasury bill auctions rejected.

Tan will also stay as the agency’s chief, incoming Finance Secretary Carlos Dominguez earlier said.

“The finance team of the incoming administration seems to have the pedigree to lead us and they will inherit an economy with sound fundamentals,” the trader said.