High bids force full rejection of P20-B reissued T-bonds

MANILA, Philippines — The Bureau of the Treasury (BTr) fully rejected yesterday all bids for reissued 20-year Treasury bonds (T-bonds) as the rates asked by investors were higher than secondary market rates.

During yesterday’s auction, securities with remaining life span of 19 years and nine months received healthy demand as total tenders amounted to P31.717 billion, about 1.5 times higher than the P20 billion issue size.

Rates asked by investors reached 6.215 percent, 50.1 basis points higher than the 6.716 percent recorded in the previous auction last Jan. 22.

This is, however, 16.2 basis points higher than the secondary market rate or the Bloomberg Valuation Rate of 6.053 percent, prompting the auction committee to reject all bids for the securities.

“We decided on a full rejection because if you would look at the average, it would be like 18 to 20 basis points higher than the secondaries right now. The 50 basis points (difference) is (based on the) January (auction). That’s the last time we issued 20-year,” National Treasurer Rosalia De Leon said.

Moreover, the national treasurer said the BTr would still need to assess the government’s spending pattern following the recent passage of the 2019 budget to help in calibrating the government’s borrowings.

The 2019 General Appropriations Act (GAA) was only signed by President Duterte last week, four months into 2019, following disagreements between the House of Representatives and Senate over insertions in the budget.

Following this, government expenditures from January to March reached P777.99 billion, 11.2 percent or P98.31 billion lower than the target of P876.3 billion.

However, the Department of Budget and Management (DBM) said with the budget now signed, government agencies would already be able to proceed with the award of contracts and start the implementation of projects, and hopefully implement catch up measures to minimize the impact of the budget delay.

Meanwhile, De Leon said the Philippines’ issuance of renminbi-denominated securities or panda bonds may be deferred until May.

The Treasury previously expected the fund raising activity to happen after Holy Week, but De Leon said the agency is still awaiting for the necessary approvals.

These include an approval from the National Association of Financial Market Institutional Investors (NAFMII) in China, as well as local regulators.

The Philippines successfully raised $230 million or about 1.46 billion renminbi during the maiden issuance of three-year panda bonds in March last year.

For 2019, the government is expected to borrow P1.19 trillion, 20 percent higher than the 2018 program of P986 billion due to higher fiscal deficit ceiling.