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Treasury fully awards reissued bonds despite surge in yields

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday even as yields surged as investors preferred to keep their cash amid an uncertain economic outlook.

The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued 10-year T-bonds it auctioned off on Tuesday. The offer was nearly two times oversubscribed as bids reached P53.92 billion, but this was lower than the P63 billion in tenders seen when the notes were last offered on Feb. 2.

The 10-year bonds, which have a remaining life of nine years and three months, fetched an average rate of 4.614%, surging by 154.8 basis points (bps) from the 3.066% seen in the previous offering.

The 10-year tenor was quoted at 4.473% at the secondary market on Monday, based on PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said the Treasury made a full award of the 10-year papers despite the higher rate as the average yield fetched was still aligned with prices at the secondary market.

“Pension and insurance funds need long-term assets to match their portfolio,” Ms. De Leon told reporters in a Viber message after the auction.

A bond trader said investors are holding on to their cash in the meantime as economic prospects remain murky.

“People are not willing to hold long bonds. Cash is king. At the same time, we see that the government needs to borrow more due to lower revenues,” the trader said.

The Health department reported that the daily count of virus cases surged to a fresh record high of 8,019 on Monday, bringing the tally to 671,792.

Travel restrictions in Metro Manila and nearby areas have been tightened anew for two weeks until April 4 due to rising coronavirus cases in the country.

Economic managers backed localized lockdowns as they find these less disruptive for the broader economy. However, they admitted that the recent spike in cases and tighter restrictions could further delay the economy’s recovery.

The government has set a 6.5-7.5% economic growth target for this year. Gross domestic product (GDP) dropped by a record 9.5% in 2020.

The BTr plans to borrow P160 billion from the local debt market this month: P100 billion via weekly auctions of Treasury bills and P60 billion from fortnightly T-bond offerings.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of GDP. — B.M. Laforga

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