Demand for T-bonds drops below target offer

MANILA, Philippines — The demand for long-term securities fell below what the government is offering after inflation picked up anew and broke six straight months of easing.

The Bureau of the Treasury yesterday partially awarded P21.187 billion out of the P30 billion on offer for the original issue of three-year Treasury bonds. This is the first T-bond auction for the month.

Demand only reached P28.987 billion, short of what the Treasury intended to raise. Bids also dipped by 43 percent from the last auction where offers reached P50.979 billion.

This comes after headline inflation jumped to 5.3 percent in August from 4.7 percent in July. The latest print effectively snapped six months of inflation downtrend.

The August rate, however, settled near the upper end of the central bank’s assumption of 4.8 to 5.6 percent.

Inflation picked up anew amid more expensive food items following the recent typhoons, as well as higher transport costs due to oil price hikes.

During yesterday’s auction, the three-year T-bonds fetched an average rate of 6.222 percent, up by 1.8 basis points from the 6.204 percent BVAL Reference Rate, which is the standard for securities.

Rates went from a low of 6.11 percent and a high of 6.373 percent. The coupon rate is set at 6.25 percent.

Further, yesterday’s average rate was also significantly higher than the 5.883 percent during the last three-year T-bond auction on April 4.

At the time, the government fully awarded P25 billion.

The latest offering has a maturity date of Sept. 7, 2026.

For this month, the Treasury aims to raise P180 billion from the local debt market. Of this, P120 billion is expected to come from T-bonds.