Rates for 20-year T-bonds rise to 6.85%

MANILA, Philippines — The Bureau of the Treasury (BTr) made a partial award yesterday of the 20-year Treasury bonds as the market was asking for higher rates due to expectations of policy tightening both in the Philippines and the US.

During yesterday’s auction, the BTr awarded only P4.26 billion in tenders for securities maturing by 2038 after it capped the accepted rates.

As a result, the papers fetched an average rate of 6.85 percent, 43.6 basis points higher than the 6.414 percent recorded in the previous auction.

The auction met healthy demand, gathering P19.36 billion in total tenders, almost twice the P10 billion original volume.

National Treasurer Rosalia De Leon said the auction committee decided on a partial award to temper down the increase in the rates asked by government securities eligible dealers.

 “(It is) not yet time to step into the vicinity of seven percent...We feel that would be too much of an increase in terms of where we were in the last auction for the 20-year securities. We are also tempering the increase,” De Leon said.

She said the market may have been asking for higher rates due to expectations of policy rate hikes in the next Bangko Sentral ng Pilipinas’ (BSP) Monetary Board meeting of the Bangko Sentral ng Pilipinas.

“I think investors are still putting a premium...as the BSP policy meet draws near. Also, in anticipation of the Fed (US Federal Reserve) action, coming from the hawkish sentiments and pronouncements of the Fed,” she said.

Meanwhile, De Leon said the Development Budget Coordination Committee (DBCC) increased the share of foreign loans in the country’s total borrowing portfolio for 2018.

“Remember, last year we did the RTB and that was pre-funding for what we were supposed to be funding for 2018,” De Leon said.

“At the same time, we are also exploring new markets, the Panda (bonds), and right now, we are watchful of the Samurai market,” she said.

“So we are also looking for new structures which can also cater to new investors as we diversify our investor base.”