Government fully awards 10-year bonds as rates rise

MANILA, Philippines — The government awarded in full the reissued 10-year Treasury bonds offered yesterday even as its rate spiked on lingering inflation concerns and rising US Treasury yields.

The Bureau of the Treasury (BTr) raised as programmed P30 billion from the bonds from total tenders of P53.92 billion, making the issuance nearly twice oversubscribed.

The debt papers, which have a remaining term of nine years and three months, fetched an average rate of 4.614 percent, higher than the average rate of 3.066 percent when it was last offered on Feb. 2 and 2.724 percent when the debt papers were offered in August 2020.

Bids ranged from 4.350 percent to 4.700 percent as the market tested the government’s willingness to accept higher rates amid prevailing conditions.

National Treasurer Rosalia de Leon said the rate accepted by the government in yesterday’s auction were “aligned with market pricing.”

With the award, BTr brought the total outstanding volume for the series to P120 billion.

The Treasury will not be opening the tap facility that allows dealers to access securities after the primary auction at rate set during the offer.

Dave Estacio, chief dealer of the treasury group of First Metro Investment Corp. (FMIC), said the government likely accepted the higher yields to raise more funds for the government’s pandemic response.

“Amid the ample liquidity in the financial system, the BTr is just taking the opportunity to raise funds as it focuses on its mandate to fund the republic amid the rising pandemic expenses,” he said.

He noted last week that the sustained rise in government security yields remain largely influenced by remaining concerns on inflation and the surge in US Treasury yields.

Inflation quickened to a fresh two-year high of 4.7 percent in February as prices of meat continued to rise and oil prices normalize coming from last year’s lows.