T-bond rate eases amid brisk demand

The sale of seven-year Treasury bonds (T-bonds) on Tuesday saw strong demand due to the scarcity of securities available in the final quarter of the year, allowing the government to borrow at a lower rate.

Auction results showed the Bureau of the Treasury (BTr) borrowing the amount of P15 billion via reissued seven-year T-bonds as total bids reached P86.4 billion, about 5.8 times larger compared with the original offer size.

The BTr said the seven-year debt paper, which has a remaining life of four years and seven months, fetched an average rate of 5.508 percent, cheaper than the 5.571 percent quoted for the comparable tenor at the secondary market as of Sept.30, based on Peso Bloomberg Valuation Service Reference Rates data provided by the Treasury.

This was also lower than the 6.058 percent recorded when the tenor was last awarded three weeks ago.

“The strong response was expected given less supply of bonds in the fourth quarter. Awarded levels were a touch lower than the secondary market in the [morning] session,” Dino Angelo Aquino, vice president and head of fixed income at Security Bank Corp., told Inquirer.

For the last three months of the year, the government aims to borrow P310 billion from the domestic market, less than half of the P630 billion borrowing program in the third quarter.

In October alone, it seeks to borrow P145 billion from the local market, of which P100 billion will come from Treasury bills and P45 billion through T-bonds.

For Aquino, the attempt to secure nearly six times the planned borrowing was one of the strongest the market has seen. He attributed this to “light positioning,” as many investors were seen taking profits as September drew to a close.

To address the state’s budget deficit, which is limited to P1.48 trillion or 5.6 percent of this year’s gross domestic product, the government borrows from both local and foreign sources.