THE GOVERNMENT made a full award of its reissued three-year Treasury bonds (T-bonds) it offered on Tuesday as its rate declined following the release of data showing slower inflation in September.
The Bureau of the Treasury (BTr) borrowed P30 billion as planned via the T-bonds on Tuesday as the offer was almost four times oversubscribed, with bids amounting to P114.488 billion.
The government made a full award of its offer as the reissued three-year debt papers — which have a remaining life of two years and 11 months — fetched an average rate of 2.182%, declining by 9.7 basis points from the 2.279% seen in the previous auction on Sept. 8.
The Treasury also opened its tap facility on Tuesday to borrow another P15 billion via the three-year bonds to accommodate the strong demand seen yesterday.
National Treasurer Rosalia V. de Leon said the lower average yield fetched for the three-year papers yesterday reflected an improving economic outlook among investors following the release of data showing inflation eased further last month.
“Following the lower September inflation print and remarks from [central bank] Governor Benjamin E. Diokno, the auction saw strong subscription and pushed rates down from secondary levels,” Ms. De Leon told reporters in a Viber message after yesterday’s offering.
At the secondary market on Tuesday, the three-year T-bonds fetched 2.284%.
Inflation eased for the second straight month in September to its slowest in four months on lower prices of food and non-alcoholic beverages.
Headline inflation stood at 2.3% in September, the slowest since May’s 2.1%, the Philippine Statistics Authority (PSA) reported yesterday. The September print was down from the 2.4% pace in August but faster compared with the 0.9% print in September 2019.
The latest reading matched the median estimate in a BusinessWorld poll conducted last week and fell within the Bangko Sentral ng Pilipinas’ (BSP) 1.8%-2.6% estimate range for September.
Year to date, inflation has so far averaged 2.5%. This is higher than the BSP’s forecast of 2.3% for the year but still within its 2-4% target.
Meanwhile, a trader said the auction result shows that the three-year tenor remains attractive to investors.
“It seems the three-year space is the sweet spot in the curve for investors as reflected in the robust volume of bids submitted. Results were somehow lower than expected as the bond was trading around 2.20% levels prior to the auction,” the trader said.
Ms. De Leon said the government’s P540-billion advance from the central bank means the Treasury has ample cash for its financing requirements amid the coronavirus pandemic.
“With the advance from the BSP, the BTr is on track with its borrowing program to meet funding requirements. You have seen full awards in our auctions allowing us to raise funding in the onshore market as planned,” she said.
The Treasury is looking to raise P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond auctions.
The government wants to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — KKTJ