Oversubscription marks sale of 10-year bonds

The yield on the 10-year treasury bond on Tuesday eased to 4.75 percent, 12.5 basis points lower than the 4.875 percent for the most recent float of the same tenor awarded last July.

Even then, Tuesday’s coupon was also 1.62 basis points higher than the 4.7338 percent for the corresponding done deals in the secondary market.

The offer is a fresh issue and will mature on Sept. 13, 2022.

Investors tendered a total of P44.155 billion, or almost five times the volume offered. The Bureau of the Treasury (BTr) raised P9 billion as planned.

According to Deputy Treasurer Eduardo S. Mendiola, Tuesday’s result proves that the domestic financial market is indeed teeming with liquidity.

“The volume of tenders show the market’s confidence in government securities and in the country overall,” Mendiola said in an interview.

He added that, given the situation, the government is now an issuer rather than just a borrower.

“What we are doing now is liability management as we are now shifting to an issuance program from a pure borrowing program,” Mendiola said.

He explained that, in the past, the government issues securities “purely for financing the (budget) deficit.”

He added that, nowadays, debt notes are issued more for the development of the domestic capital market, which is the government’s steady source of financing.

Further, Mendiola said the Bureau of the Treasury has named the Land Bank of the Philippines and the Development Bank of the Philippines (DBP) as lead arrangers for the planned issuance of retail T-bonds later this year.

Landbank and DBP are expected to tap other banks to help in the latest RTB issuance, where the BTr hopes to raise up to P70 billion worth of 25-year notes.

Also, DBP was given the mandate as lead arranger of the planned bond exchange this year. The BTr expects offers for the swap of outstanding 5-, 7-, 10-, 15-, 20- and 25-year notes for fresh ones.

Mendiola said there is no schedule yet for the RTB issue and bond swap.

He added that the bond swap was meant to set benchmarks for each tenor and that, as a rule of thumb, this would be possible only with a minimum of P60 billion for each tenor.

This suggests a total swap coverage of P300 billion to P360 billion, which is about a tenth of the BTr portfolio of outstanding securities worth P3 trillion.