MANILA, Philippines — The Bureau of the Treasury (BTr) yesterday cut the accepted bids for reissued 20-year Treasury bonds (T-bonds) amid rising interest rates ahead of the Monetary Board’s meeting this week.
A total of P4.12 billion in securities maturing in 2038 were awarded yesterday after the auction committee decided to cap the rates at seven percent. This was more than twice lower than the original offer size of P10 billion.
As a result, the bonds fetched an average rate of 6.979 percent, 12.9 basis points higher than the 6.85 percent recorded in the previous auction.
This was, however, lower than the secondary market rate for the same securities, which settled at 7.2304 percent before the auction closed.
Had the auction committee decided on a full award, the average rate fetched by the 20-year debt papers would have been higher at 7.11 percent.
The auction was 1.4 times oversubscribed, attracting total tenders of P14.2 billion.
In an interview, national deputy treasurer Erwin Sta. Ana said the BTr decided to make a partial award to come up with rates that are well within the “optimal market level.”
“We looked at the quality of the bids. We compared it with the pre-auction surveys we do with the dealers. So we try to look where the sweet spot is, what we can say as optimal market level. That’s the driving force behind the partial award,” Sta. Ana said.
He said the higher rates asked by investors was mainly driven by developments both in the domestic and international market.
Sta. Ana cited, in particular, market jitters due to the upcoming policy meeting of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP).
Nevertheless, Sta. Ana said there was healthy demand for the long-term securities.
“We saw demand at the long-end considering that we had a decent non-competitive bid. So it’s a good turnout actually,” the official said.
Meanwhile, Sta. Ana said there may be improvements in the BTr’s auctions after the BSP announces its policy decision.
“Once the market gets more clarity on the policy agenda of the BSP, we could probably see some improvements in terms of auction participation,” he said.