T-bond offering mixed amid Middle East conflict
The government was not able to fully raise its target amount of long-dated local debts during Wednesday’s sale of Treasury bonds (T-bonds) as markets still watch how the conflict in the Middle East unfolds.
Auction results showed the Bureau of the Treasury (BTr) was able to raise its target amount of P20 billion via reissued T-bonds, which have a remaining life of two years and 10 months.
The offering attracted P40.7 billion in total bids, twice the original size of the issuance.
In turn, the debt paper fetched an average rate of 5.760 percent, slightly lower than the 5.803 percent recorded in the last auction of three-year T-bonds. It was also cheaper than the 5.792 percent quoted for the comparable tenor in the secondary market.
But the BTr was only able to borrow P15.1 billion out of the P20 billion that it originally planned to raise via reissued 25-year T-bonds, which have a remaining term of 24 years and seven months.
Demand for the debt notes was modest, only attracting total tenders amounting to P22.6 billion.
The T-bond fetched an average rate of 6.649 percent, up from 6.476 percent seen in the previous offering of 25-year debt securities. It was also slightly higher than the secondary market rate of 6.648 percent.
“The average three-year Treasury bond yield was slightly lower after US President Trump announced a tentative ceasefire between Iran and Israel … thereby a positive development,” Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said.
Meanwhile, Ricafort said the 25-year T-bond tracked “higher long-term US Treasury yields recently due to US fiscal concerns” amid US President Donald Trump’s tax plan.
For this year, the Marcos administration is targeting to borrow P2.55 trillion from creditors at home and abroad to plug a projected budget hole amounting to P1.54 trillion, or equivalent to 5.3 percent of the country’s gross domestic product.
By sources of financing, the government will borrow P507.41 billion from foreign investors in 2025. The remaining P2.04 trillion is targeted to be raised domestically, of which P60 billion will be via short-dated Treasury bills and P1.98 trillion via T-bonds.
