Treasury makes full award of reissued five-year bonds

THE GOVERNMENT fully awarded the reissued five-year Treasury bonds (T-bonds) on Wednesday as yields picked up slightly on the back of an upgraded credit rating outlook for the Philippines.
At yesterday’s auction, the Bureau of the Treasury raised P10 billion as planned from the reissued five-year bonds maturing on March 8, 2023.
Total tenders reached P18.924 billion, nearly double the amount the government wanted to raise.
The five-year bonds fetched an average rate of 5.592% with a coupon rate of 5.5%. This was higher than the 5.452% average rate fetched when the five-year bonds were last sold in March.
At the secondary market, before the auction, the five-year papers were quoted at 5.4372%. The tenor fetched 5.4544% at the close of the trading.
National Treasurer Rosalia V. De Leon told reporters shortly after the auction that Wednesday’s offer was met with strong demand since the five-year tenor is a “sweet spot” for the investors due to its closer maturity date.
“They like the five years — it’s a sweet spot. The three- and the five-year [tenors], that’s where the [investors] flock,” Ms. De Leon said.
“I think because of the slew of good news lately. S&P gave a positive outlook last week.”
Debt watcher S&P Global Ratings upgraded its credit outlook for the Philippines to “positive” from “stable” last week, hinting on better chances of a rating upgrade.
“Obviously, it also helps because it’s also signalling that 12 months down the road, we might be ready for another rating upgrade, since outlook is already positive,” Ms. De Leon added.
The national treasurer also noted that the government’s “good collection performance” was also factored in by investors.
“I think that has a calming effect because of the pronouncements coming from the BSP (Bangko Sentral ng Pilipinas) Governor [Nestor A. Espenilla, Jr.] that [a rate hike] is just a matter of time,” Ms. De Leon added.
“And given already the BSP inflation [forecast] of 3.9%, the market is seeing that this time, the BSP will move [its rates].”
Meanwhile, a bond trader said the auction result “is well within expectations.”
“The yield range is well within expectations, though I’m still surprised that [the stop-out level] reached 5.69%,” the trader said, even while noting that they were “kind of confused” with the auction result.
“[The Treasury] always says they can afford to reject, but they keep on issuing at higher rates,” the trader said.
The government seeks to raise P325 billion this quarter from local creditors through weekly auctions of securities. — K.A.N. Vidal