Rates higher for P20 billion T-bonds

MANILA, Philippines — Reissued 20-year Treasury bonds (T-bonds) yesterday fetched higher rates, prompting the Bureau of the Treasury (BTr) to partially award the P20 billion offering.

During yesterday’s auction, securities with remaining life span of 19 years and two months fetched an average rate of 5.341 percent after the auction committee decided to cap the accepted rates at 5.4 percent.

This was 32.6 basis points higher than the 5.015 percent yield fetched by the same debt papers in its last successful auction on July 30. It was likewise higher than the secondary market rates for the 20-year securities, which settled at 5.233 percent yesterday.

Healthy demand met the P20 billion offering, with total tenders amounting to P28.07 billion. However, only P12.27 billion was awarded.

Had the securities been fully awarded, they would have fetched an average rate of 5.403 percent, which is even higher by 38.8 basis points as compared to the July 30 result.

Sought for comment, National Deputy Treasurer Sharon Almanza said the rise in interest rates was a reflection of the market’s preference for short-term debt notes amid uncertainties in the interest rate environment.

She said external factors, particularly the ongoing trade tensions between the US and China, also drove interest rates up.

“They opt to stay on the short given the uncertainty in rates. The BSP (Bangko Sentral ng Pilipinas) governor said there might be another possible cut in December but it will be data driven,” Almanza said. “And also the uncertainty in the external factors, the trade war and all.”

However, Almanza noted that while rates went up, the increase was minimal if compared with the September 24 auction, when the auction committee decided to fully reject the 20-year bond offering.

 “Relative to the previous auction, it rose a bit. The September auction, we had that rejected, it (average rate) was about 5.356 percent. So this one was slightly higher, but the difference is not that big,” she said.

The deputy treasurer also noted that the auction committee decided on a partial award, instead of a full rejection for this auction, to accommodate institutional clients who are in need of long-term investments.

“We awarded partially to accommodate those clients and at the same time para, so that we can reprice this portion of the (curve) on the long (side),” Almanza said.