Reissued T-bonds fetch higher rates

MANILA, Philippines — Rates for reissued 10-year Treasury bonds picked up yesterday, but remained below secondary market rates, prompting the Bureau of the Treasury (BTr) to fully award the P20 billion offering.

During yesterday’s auction, securities with remaining life span of nine years and one month fetched an average rate of 4.617 percent, 42.1 basis points higher than the 4.196 percent rate recorded in the previous auction.

This is, however, lower than the secondary market rates (Bloomberg Valuation Rate or BVAL) for 10-year debt papers, which settled at 4.683 percent before the auction closed.

Total tenders amounted to P29.301 billion, almost 1.5 times larger than the P20 billion offer volume.

In an interview, National deputy treasurer Erwin Sta. Ana said rates for the 10-year bonds are starting to pick up again after plateauing back in August.

Despite this, Sta. Ana said rates are still in line with the market rates, prompting the auction committee to fully award the debt papers.

“(We had a) full award. Weighted average of 4.617 percent is still lower than the BVAL, so the committee decided to award it in full,” he said.

Sta. Ana also noted that the demand for long-term securities remain healthy, especially in a low interest rate environment.

“Typically, if the interest rates are falling, tendency (of investors) is to go for yield pick up, so the longer tenors will give you that yield pick up. Here it’s almost 1.5 (bid-to-cover ratio). We saw that there’s definitely demand for the tenor,” he said.

Meanwhile, the deputy treasurer said the BTr’s planned one-year “premyo” bonds issuance may not be launched yet this week as the agency is still finalizing the mechanics.

“We are just finalizing some technical details on the rewards, on the raffle. We have to make sure that everything is above board. We are consulting with the COA (Commission on Audit) because they will be the observers for the raffle,” Sta. Ana said.

In the meantime, he said the Treasury has already started briefing some government employees on the proposed bond issuance. He said a nationwide roadshow will be conducted once the bond offering is launched.

Under the so-called “premyo bonds,” individual investors, associations and cooperatives have a chance to win as much as P1 million by investing in government securities. The Treasury will sell the debt papers at multiples of P500, each carrying quarterly coupon payments, as well as a chance to win cash prizes during quarterly draws.

According to Sta. Ana, the Treasury is currently considering to cap the allowable raffle entries to 20,000 per individual or cooperative, for an investment of P10 million.