The Philippine government raised P22.969 billion out of a P35-billion offer of five-year Treasury bonds, still resorting to a partial award even as rates are going down.
Tuesday’s offer was a reissue of 20-year T-bonds that were first awarded in September 2007, with four years and nine months remaining until they mature.
The offering was oversubscribed with a total of P65.514 billion of tenders from investors.
With the partial award, the debt paper fetched an average of 6.568 percent, which was 56.3 basis points (bps) lower than the 7.131 percent average in the previous auction last Nov. 8.
National Treasurer Rosalia de Leon told reporters “rates aggressively declined” as there was considerable liquidity in the market considering that there will be securities maturing next week.
De Leon said the auction committee made decisions to take advantage of these factors, and to further bring rates close to the level prevailing at the secondary market.
She was referring to the 6.549-percent rate for government bonds, which was 1.9 bps lower than last Tuesday’s auction result.
For deals on comparative corporate bonds available at the secondary market, the prevailing rate was 6.4 bps higher at 6.531 percent.
“The markets also took signal from the slower pace of rate hikes by the United States Federal Reserve and the Bangko Sentral ng Pilipinas,” De Leon added.
Both the American and Philippine central banks earlier this month raised their respective policy rates by 75 bps, and are expected to continue raising rates in December but forecasts point to 50 bps.
Earlier this week, Finance Secretary Benjamin Diokno said the government’s prudent strategy over the years, “which was expressed in the country’s strong credit ratings amid a sea of ratings downgrade globally during the pandemic, enabled the government to meet its financing needs at the lowest possible cost, consistent with a prudent degree of risk.”
As of the end of September, the national government’s debt stock reached a new record of P13.52 trillion, representing 63.7 percent of the domestic economy.
“While the absolute level of debt may increase, the economy’s ability to pay also increases from the economic gains and investments it pursued, including where the debt is used for,” Diokno said.
He reiterated that as long as the economy grows faster than the growth of public debt then the level of debt becomes sustainable.
The finance chief noted that the debt-to-GDP ratio was below 40 percent before the pandemic, and went up to 62 percent this year as revenues fell while pandemic-related spending rose.
“With sustained, strong growth, expect the debt ratio to fall to about 50 percent by 2028,” Diokno said.