Reissued T-bonds fetch higher rates

MANILA, Philippines — The government yesterday raised P35 billion from the auction of reissued seven-year Treasury bonds (T-bonds) as investors kept their appetite for long-term debt papers amid risks posed by the spread of the more infectious COVID-19 Delta variant.

The Bureau of the Treasury awarded in full P35 billion in reissued T-bonds with a remaining life of six years and eight months.

The issuance, with a coupon of 3.625 percent, saw its rate jump by 7.5 basis points to 3.651 percent yesterday, from 3.576 percent during its last offering.

Bids submitted for the seven-year T-bonds reached P69.758 billion, oversubscribing the auction by about twice thanks to sustained confidence on long-term government securities. With the full award, the Treasury decided to sell another P10 billion through the tap window facility.

National Treasurer Rosalia de Leon told reporters that liquidity for T-bonds maintained its footing in spite of risks posed by the spread of new variants. She said yesterday’s offering maturing in six years and eight months lands on the “sweet spot” of investors.

“We opened tap for P10 billion (on) strong volume, reasonable rates [and] full award,” De Leon said in a text message.

The rate also aligned with projections made by bond traders interviewed by The STAR, who said the reissued T-bonds would fetch a yield between 3.650 and 3.7 percent.

Traders added investors may demand the government to increase their yields in the succeeding auctions to make up for concerns on the peso’s devaluation and a credit rating downgrade.

Traders also said the next auctions may be influenced by the results of the scheduled meeting yesterday and today of the US Federal Open Market Committee. Further, investors may choose to opt out of the August cycle if the government fails to address the spread of the Delta variant.

For July, the government raised a sum of P60 billion from the sale of Treasury bills with tenors of 91 days, 182 days and 364 days. Likewise, it awarded P121.8 billion of the P140 billion in T-bonds it auctioned for the month.

The government plans to widen its borrowing program for 2021 to P3.02 trillion on a 85:15 ratio in favor of domestic sources.

As such, economic managers expect the debt stock to reach a record P11.98 trillion by the end of this year, as the government heightens its borrowing to fund its measures to contain the spread of the virus.