Awaiting Fed news, investors skip PH bonds for now

MANILA, Philippines–Investors appeared to have reined in their appetite for the longer term, reissued 19-year Philippine treasury bonds on Tuesday as they adopted a wait-and-see stance on how the United States Federal Reserve’s meeting would pan out this week.

During Monday’s auction for the T-bonds worth P25 billion, the Bureau of the Treasury (BTr) made a partial award of P15.950 billion at an average annual rate of 5.095 percent—157.8 basis points higher than the 3.517 percent set when the bonds were originally issued in March last year.

The reissued bonds will mature in March 2033.

BTr officials said the auction was undersubscribed, with tenders amounting to only P17.320 billion.

National Treasurer Rosalia V. de Leon told reporters that investors seemed to have been “shying away” from long-term instruments ahead of the policy-setting meeting of the US Fed.

They are anticipating that the United States’ key policy rate will spike up already, she said. “The FOMC [Federal Open Market Committee] meeting will start today, but expectations are, they will already stop the Fed taper [and] … rate hikes would come sooner than expected.”

But De Leon said long-term bonds would remain essential, especially among insurance firms.

That is why the government will conduct the remaining auctions for the year as scheduled, she explained.

“We’ll maintain the volume,” she said.

Also, she added, Treasury officials will need to go over the tenor of the debt instrument, which may lead to a shift back “to the belly of the curve.”

“We are awash in cash, but we also [need to] provide the benchmark in the market,” she explained.

De Leon said there are no immediate plans for offshore as well as retail bond issuances.

The US Fed this week is expected to tackle further changes in US monetary policy, which observers say may lead to a rise in policy interest rates for next year.