By Aaron Michael C. Sy, Journalist
THE GOVERNMENT secured an initial P135 billion from the issuance of its new 10-year fixed-rate Treasury notes it auctioned on Tuesday utilizing a novel issuance format aimed at institutional participants.
The amount collected was over four times the starting P30-billion offering, with bids totaling P197.3 billion, as stated by the Bureau of the Treasury (BTr) after the auction.
The new Treasury bonds (T-bonds) attained a coupon rate of 6.375%, leading to an average rate of 6.286%, according to the results from the rate-setting auction available on the Treasury’s website.
Accepted bid yields were between 6% and 6.4%.
The coupon rate was 10.37 basis points (bps) above the 6.2713% observed for the 10-year notes based on PHP Bloomberg Valuation Service Reference Rates data as of April 15 published on the Philippine Dealing System’s website prior to the auction.
The BTr will maintain the offering of the notes to eligible dealers until April 24, with a minimum investment requirement of P10 million and increments of P1 million thereafter.
The issuance date for the notes maturing in 2035 is planned for April 28.
“The prolonged offer timeframe will enable a greater volume than our typical auction, ensuring liquidity,” National Treasurer Sharon P. Almanza conveyed in a Viber message.
The Treasury noted that the extended offer period is unprecedented for a nonretail bond issuance, as it “aims to establish a new pathway for developing liquid benchmarks.”
“Demand was robust. Investors are eager to [purchase] as inflation remains low, which could prompt further rate reductions, making the rate appealing,” a trader mentioned via phone.
The trader remarked that the coupon rate aligned with market expectations, being comparable to secondary market rates.
The Monetary Board resumed its easing cycle last week, reducing the target reverse repurchase rate by 25 bps to 5.5%. Rates on the overnight deposit and lending facilities were also decreased to 5% and 6%, respectively.
Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. indicated that anticipations of reducing inflation bolster the transition to a more accommodating monetary policy stance, mentioning that they are contemplating additional rate cuts this year in “incremental steps” of 25 bps at a time.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort articulated in a Viber message that the coupon rate corresponded with the recently elevated 10-year US Treasury yield attributed to the Trump administration’s tariff policies.
“I believe the volume is favorable for BTr as it provides them with a buffer. We see this as nearing their target volume. This alleviates pressure on shorter tenors, particularly for five years and below,” another trader stated in a text message.
The BTr could gather up to P200 billion from this offering to align with maturities this month estimated at around P170 billion, and in anticipation of large maturities in August, the trader further noted.
Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LANDBANK) serve as the joint lead issue managers, with BDO Capital & Investment Corp., BPI Capital Corp., China Bank Capital Corp., First Metro Investment Corp., PNB Capital and Investment Corp., and Security Bank Capital Investment Corp. as joint issue managers.
Qualified dealers for the new bonds comprise Asia United Bank, BDO Capital and Investment Corp., BDO Unibank, Inc., BPI Capital Corp., China Banking Corp., Citibank NA, CTBC Bank (Philippines) Corp., DBP, Deutsche Bank AG, East West Banking Corp., The Hong Kong and Shanghai Banking Corp. Ltd., ING Bank NV, Maybank Philippines, Inc., Metropolitan Bank & Trust Co., Bank of Commerce, Philippine National Bank, Rizal Commercial Banking Corp., Standard Chartered Bank, Security Bank Corp., LANDBANK, and Union Bank of the Philippines, Inc.
The Treasury aims to raise P245 billion from the domestic market this month — P125 billion through T-bills and P120 billion via T-bonds.
The government borrows from local and international sources to assist in funding its budget deficit, which is set at P1.54 trillion for this year.
