Government raises P30 billion through successful T-bonds auction

The national government has successfully raised P30 billion through the full award of all seven-year Treasury bonds, although rates have increased.

These reissued securities, which have a remaining term of six years and two months, fetched an average yield of 6.299 percent.

This resulting yield is 13.7 basis points (bps) higher than the average 6.162 percent recorded in the previous issuance in March.

However, the resulting rate is 70.1 bps lower than the original coupon rate of 7 percent, which was set on its first issue in October 2022.

Furthermore, the latest average rate is higher than the corresponding rates at the secondary market for government securities, exceeding it by 11.6 bps against 6.183 percent.

In addition, the latest average rate is higher by 5 bps compared to the 6.249 percent of corresponding corporate bonds at the secondary market.

“The auction was 1.9 times oversubscribed, with total tenders reaching P57.8 billion,” stated the Bureau of the Treasury.

“With its decision, the auction committee has raised the full program of P30 billion, bringing the total outstanding volume for the series to P121.8 billion.

The latest results seem to contradict what First Metro and UA&P Capital Markets Research have said in their latest monthly report regarding factors that initially “pull down long bonds.”

These factors include the Bangko Sentral ng Pilipinas’ pause on their interest rate hiking cycle for two consecutive policy meetings in May and June, as well as the lowering of reserve requirements for universal and commercial banks.

Despite the increased money supply resulting from the BSP’s decisions, First Metro and UA&P expect that yields may fall by 25 basis points in the second semester of 2023 as inflation loses further steam.

Meanwhile, the Marcos administration’s economic team is currently in New York to generate interest in a planned issuance of $2 billion worth of dollar-denominated retail T-bonds in September.

National Treasurer Rosalia de Leon has repeatedly stated that the national coffers are “still awash with cash,” and therefore there is no rush to raise funds from overseas markets.

Despite this, the Marcos administration’s economic team has just concluded their latest North American visit, which included a trip to New York to drum up interest in their planned $2 billion retail T-bond issuance.