P25B in T-bonds awarded at lower rate

The Bureau of the Treasury on Tuesday fully awarded all P25 billion in reissued seven-year IOUs at a lower rate amid a market bullish on prospects under the Duterte administration.

The new administration is also currently reviewing possible borrowing schemes to finance a wider deficit for this year and the succeeding years.

Tuesday’s T-bonds auction was oversubscribed as the Treasury received P44.7 billion in tenders for the debt paper maturing on April 21, 2023.

The average annual rate slid 44.5 basis points to 3.016 percent from 3.461 percent during the previous auction.

“There was very good appetite and very good bids. So this, of course, is a good turnout, especially with the Sona done Tuesday,” National Treasurer Roberto B. Tan told reporters, referring to President Duterte’s State-of-the-Nation Address.

“I think the market is very much pleased with the policy pronouncement of the President, which is business-friendly and market-oriented,” Tan added.

While the implementation of the Bangko Sentral ng Pilipinas’ interest rate corridor is expected to bring up Treasury IOU rates toward the policy rate of 3 percent, Tan said they expected a low interest rate scenario until yearend with external developments—such as a more dovish US Fed as well as slow global growth—also in play.

“The country’s macroeconomic fundamentals are sound, and the liquidity of the market still deep. These are all helping sentiment for investors to bid aggressively,” Tan explained.

Separately, Tan said that while the new administration has no plan yet for any new borrowings, the Treasury was studying the program for the next six months and would make a recommendation for the financing strategy.

Duterte’s economic managers had widened the budget deficit target for this year to 2.5 percent from 2 percent previously, while a 3-percent deficit was programmed for the succeeding years until 2022 as the government plans to ramp up spending on public goods and services.

Tan said the possible financing schemes would be “the same exercises we used to do,” such as debt swap, among others. “But in terms of timing, volume and tenors, we will still study them.”