MANILA -- Demand for the Bureau of the Treasury’s freshly-issued 20-year Treasury Bond (T-bond) was high Tuesday after the PHP20 billion offering received PHP50.921-billion worth of tenders.
The auction committee awarded the debt paper in full, which has a coupon rate of 6.750 percent.
Its average interest rate stood at 6.716 percent, lower than the 6.979 percent the same tenor fetched during the auction on June 19, 2018.
National Treasurer Rosalia de Leon told journalists after the auction that results since the start of the year have been good.
She noted the shift of investors’ preference for longer tenor securities given their expectations of a continued deceleration in the domestic inflation rate.
This, as inflation in the last two months of 2018 slowed to 6 percent and 5.1 percent, respectively, after peaking at 6.7 percent in the previous two months.
Deceleration in the country's inflation rate is seen to also impact domestic interest rates, since yields have risen after the Bangko Sentral ng Pilipinas (BSP) hiked its key rates by a total of 175 basis points last year to help address surging price pressures.
Other factors for the shift in investors’ tenor preferences is the wait-and-see stance on incoming economic data and the cut in the International Monetary Fund’s (IMF) 2019-2020 global growth outlook to 3.5 percent and 3.6 percent, respectively, from 3.7 percent previously for both years, de Leon said.
The National Treasurer admitted that the decision to make full awards in most of the auctions since the start of 2019 is partly driven by the need to generate funds for the government’s massive infrastructure program dubbed “Build, Build, Build”.
It is more advantageous for the government to spend more on its infrastructure program when outlook for global growth is bleak because increased infrastructure investment serves as stimulus for the domestic economy, she said.
De Leon also pointed out that the government has the leeway to hike its infrastructure investment because both the Bureau of Internal Revenue and the Bureau of Customs have posted improvements in their collections.
Relatively, after the issuance of USD1.5 billion worth of US dollar denominated Republic of the Philippines (ROP) bond early this month, de Leon said the government is still open to issuing renminbi-denominated Panda bond and yen-denominated Samurai bond to take advantage of opportunities.
She added that the issuance of debt instruments other than those denominated in Philippine peso and US dollar is part of the government’s decision to diversify its borrowing.
The Philippines issued 1.46-billion renminbi worth of three-year Panda bond in March 2018 and 154.2 billion multi-year Japanese yen Samurai bond last September. (PNA)
