Local creditors favor longer debt securities amid high yields

MANILA, Philippines—Domestic creditors have turned to longer-term government securities to take advantage of the prevailing high-interest rate environment.

The Bureau of the Treasury (BTr) on Tuesday (July 19) raised all of the P35 billion it wanted to borrow through reissued 10-year T-bonds.

These IOUs, first issued last month, this time fetched an average annual rate of 6.865 percent, below the 7.25-percent original coupon.

Bid rates hit a high of 6.89 percent, and a low of 6.8 percent.

In the secondary market, the same treasury bonds were priced also at a higher 6.969 percent, while other 10-year bonds traded at 6.916 percent.

Government securities eligible dealers (GSEDs) wanted to lend the BTr a total of P123.3 billion, or 3.5-times bigger than its offering, prompting the BTr to open its tap facility window to award P20 billion more in this bond series to 11 GSEDs market-makers.

As of Tuesday, the BTr raised P70 billion through debt papers maturing in June 2032.

“Strong demand is an understatement in the auction,” said National Treasurer Rosalia de Leon.

“Appetite for the long-end is coming from good yield pick-up, especially for retirement funds to lock-in high rates,” De Leon said.

Interest rates worldwide are rising as central banks aggressively raise policy rates to arrest elevated global inflation.

Asked if the BTr would prefer to issue longer tenors moving forward, De Leon replied that the Treasury was inclined to always stretch maturity, subject to a reasonable rate.

The BTr will offer a 14-year bond, the longest in a while, next week.

TSB