Treasury fully awards auction of 10-year bonds in Tuesday auction

Tuesday, 31 July 2012 20:34 VG Cabuag / Reporter

THE government on Monday made a full award at the auction of the 10-year Treasury Bonds as a result of strong appetite of investors for the debt paper.

The fresh issuance of 10-year T-bonds fetched a coupon rate of 4.875 percent, some 54.5 basis points lower than the previous average rate of 5.42 percent.

Tenders reached P31.41 billion and the auction committee made a full award of P9 billion.

“Obviously everybody is going to the market to raise money. Corporations are doing fund-raising this season,” Deputy Treasurer Eduardo Mendiola told reporters after the auction. 

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“There’s liquidity and that’s driving the big volume in the auction,” he said.

He said the rate cut of the Bangko Sentral ng Pilipinas (BSP) last week also contributed to the investors’ appetite for government debt papers.

The BSP slashed its policy rates by 25 basis points last Thursday as a pre-emptive move against the slowing down of the country’s economic growth and in order to meet its inflation target average.

The central bank is targeting average inflation rate of 3 percent to 5 percent for 2012 and 2013.

With the huge interest on government debt papers, Mendiola said that the government may proceed with its plan to issue its retail treasury bonds (RTB), a paper targeted to individual investors, by October this year.

The government may also pursue its debt swap, which is part of the Aquino administration’s debt consolidation measure, also towards the latter part of the year.  

“The RTB will raise some amount of funding but we will raise none in the exchange [measure],” Mendiola said.

The debt swap, however, will fix the maturity profile of the government papers that are currently floated in the market, he said.

“There were issuances when we had high interest rate regime. Now that the rates have gone down, maybe it’s time to consolidate all these into one uniform coupon rate that is closer to the market,” he said.

Mendiola expects to raise some P60 billion to P70 billion from the RTB, in which the government will offer a tenor of 25 years.

For the domestic debt swap, meanwhile, the government will issue 7, 10, 15, 20, 25 year tenors in exchanged for shorter-dated outstanding bonds.