P15B in treasury bonds up for auction

The Bureau of the Treasury will sell another P15 billion in T-bonds on Tuesday as it takes advantage of strong demand during recent auctions of the long-dated debt paper.

In a Dec. 5 memorandum to all government securities eligible dealers, National Treasurer Rosalia de Leon said the Treasury on Dec. 11 would auction off reissued seven-year IOUs with a remaining life of six years and three months.

The Treasury earlier advanced the two T-bond auctions scheduled for December, such that the third to be held this month would be beyond the P270-billion domestic borrowing program for the fourth quarter.

But in a text message last Friday, De Leon explained that the fresh offering would still be “for 2018 financing since this will plug for rejections in previous auctions.”

Also, the robust market reception to the last few offerings was a consideration why the Treasury will hold another T-bond auction, De Leon added.

Amid strong bids from investors, the Treasury opened its tap facility window after the last three T-bond auctions, raising an additional P53.1 billion in total.

Under the newly issued guidelines, the tap facility was no longer capped with the same volume of debt paper offered that day, allowing the Treasury to determine the amount it would issue depending on its discretion.

Unlike in regular auctions where interest rates on short-term bills and long-term bonds are determined by bids of banks, the rates on debt instruments sold over-the-counter are set by the Treasury. The rates are based on secondary market yields.

The over-the-counter facility is usually tapped when the Treasury decides to sell more securities to meet excess demand. The facility also allows the government to raise additional funds when money generated from regular auctions fall below targets.