P4.12B in bids for 20-yr bonds accepted at below secondary market rates

The Bureau of the Treasury yesterday awarded only P4.12 billion from reissued 20-year T-bonds as it capped the yield at an average of 6.979 percent.

Even as tenders reached P14.2 billion for the P10-billion offering, the Treasury accepted bids below secondary market rates, which were at a high end of 7 percent, it said in a statement.

“The motivation for the Treasury to issue a 20-year bond is to put a benchmark in that sector of the curve. Remember, when we issued our local debt capital market program, we wanted to make sure to issue on each and every sector of the curve, hence the 20-year,” Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction.

The Treasury was scheduled to sell a 10-year debt paper but changed the tenor to 20 years.

“We saw demand at the long end considering that we had a decent noncompetitive bid, and the bid-to-cover ratio is 1.4 times, so it’s a good turnout actually,” Sta. Ana said.

The IOU first issued on Feb. 22 and maturing in 2038 now has an aggregate outstanding volume of P17.2 billion. It had a coupon rate of 6.5 percent.

Sta. Ana said the higher rate was due to the “rising interest rate environment—there is really more of a cautious stance taken by some market participants” even as yields were “tempered by the demand in the long end.”

“We looked at the quality of the bids. We compared it with the preauction surveys we do with the dealers, we try to look where the sweet spot is, what we can say as optimal market level, that’s the driving force behind the partial award,” according to Sta. Ana.