BTr partially awards bonds as yields rise
The Bureau of the Treasury (BTR) on Tuesday awarded only P15.58 billion or less than half of its P35-billion bond offering as bid rates climbed due to the above-target inflation.
The Treasury sold the reissued seven-year bonds at an average annual rate of 4.207 percent, up from 3.826 percent last month.
Bids for the debt paper with a remaining life of six years and 10 months hit a high of 4.25 percent and a low of 4.075 percent.
“Rates significantly moved following the September inflation print of 4.8 percent. While lower than August’s and market forecast, inflation was much higher than the high end of the BSP (Bangko Sentral ng Pilipinas) target,” De Leon said.
Headline inflation averaged 4.5 percent as of end-September, above the Bangko Sentral ng Pilipinas’ 2-4 percent target band of manageable price hikes.
De Leon said the market may pitch higher bids for their bond purchases as the BSP expects to end 2021 with an above-target average inflation of 4.4 percent.
“We have a strong cash buffer to allow us to reject if we find bids unacceptable,” De Leon said.
Demand for long-dated government securities remained robust with P52.79 billion tendered for the bonds maturing in August 2028.
The Treasury will borrow 81 percent of this year’s financing requirements locally through the sale of treasury bills and bonds, equivalent to a gross amount of P2.49 trillion out of the total P3.07-trillion borrowings programmed for 2021.
Last month, the government’s Investor Relations Office (IRO) said reliance on long-term, mostly domestic borrowings will keep the debt profile sustainable and facilitate fiscal consolidation moving forward.
Ample domestic liquidity allows [the Philippines] to rely on the domestic market to fund the majority of its requirements while minimizing foreign exchange risks,” IRO said in a Sept. 13 presentation.
It also helped that the Philippines’ long-dated debt profile “reduces refinancing risk,” IRO added.
Citing Treasury data, IRO noted that for domestic debt, which accounted for the bulk of the national government’s outstanding obligations as of July, 51 percent were long-term or maturing in over 10 years.
Medium-term debt or one- to 10-year maturities accounted for 30 percent of outstanding locally sourced obligations, while the remaining 19 percent were short-term debt maturing in less than one year.
The share of long-term obligations to outstanding domestic debt was nonetheless dropping from the pre-pandemic level of 65.7 percent in 2019 and 55 percent last year.
Short-term locally sourced debt, meanwhile, was rising from a share of only 9.6 percent in 2019 and 14 percent in 2020.
The external debt pile was also mostly long-term — 93 percent of the end-July outstanding obligations needed to be paid in more than 10 years or longer. The rest were medium-term foreign debt maturing between one and 10 years.
Like domestic debt, the share of long-term external debt was gradually declining from 96 percent in 2019 and 94 percent in 2020.
