By Aaron Michael C. Sy, Reporter
THE GOVERNMENT on Wednesday raised an initial P107.072 billion from its second offering of recent fixed-rate Treasury notes (FXTNs) that concentrate on institutional investors.
The quantity raised for the 10-year papers was greater than 3 times the initial P30-billion goal as tenders reached P328.467 billion.
The brand new Treasury bonds (T-bonds) fetched a coupon rate of 5.925%, producing a median rate of 5.893%, results of the rate-setting auction posted on the Treasury’s website showed.
Accepted bid yields ranged from 5.75% to five.928%.
The coupon rate was 5 basis points (bps) above the 5.875% seen for a similar bond series but 0.9 bp lower than the 5.934% seen for the 10-year notes based on PHP Bloomberg Valuation Service Reference Rates data as of Feb. 18 published on the Philippine Dealing System’s website before the auction.
The general public offer period in addition to the exchange offer for the holders of bonds maturing over the subsequent 12 months will end on Feb. 20. The notes are scheduled to be issued on Feb. 23.
In April last 12 months, the federal government raised P300 billion via recent 10-year benchmark notes, well above the P30-billion program. It had initially raised P135 billion from the rate-setting auction.
National Treasurer Sharon P. Almanza told reporters after the auction that they’re aiming to lift no less than P200 billion from the issuance but noted the full may even rely on the demand from the exchange program.
The FXTN offering includes an exchange program for holders of securities maturing on April 8, Sept. 7, Sept. 20, Oct. 20, and Jan. 4, 2027.
Ms. Almanza said the coupon rate fetched by the notes was a “fair rate” despite investors asking for the next yield ahead of the central bank’s policy meeting on Thursday.
“The demand for the 5.95% was higher, the concentration of bids was there…. And the most important thing is the expectation that rates will still go down,” she said.
“If we awarded at 5.95%, we don’t need a proposal period, since that was P200 billion already.”
All 16 analysts in a BusinessWorld poll conducted last week expect the Monetary Board to deliver a sixth straight 25-bp cut at its first meeting for the 12 months on Thursday. If realized, this may bring the policy rate to 4.25%.
The Bangko Sentral ng Pilipinas has lowered benchmark borrowing costs by a cumulative 200 bps since its easing cycle began in August 2024.
Ms. Almanza said that the strong liquidity within the country’s economic system also drove demand for the offering following the maturity of a Treasury bond on Feb. 16.
Rizal Business Banking Corp. Chief Economist Michael L. Ricafort also said in a Viber message that the P232.8 billion in liquidity injected into the economic system resulting from the maturity of seven-year bonds on Feb. 13 added to the demand for fresh notes.
The offering of fresh fixed-rate Treasury notes is an element of the Bureau of the Treasury’s (BTr) consolidation of issuances, Ms. Almanza said.
“We don’t wish to introduce recent ISIN (International Securities Identification Number) [bonds] in order that the yield curve will not be fragmented. There are already an excessive amount of energetic ISIN series [bonds], so we’re retiring [them] after which we’re only introducing one or two [FXTN],” she said.
For this 12 months, she said they may only issue FXTN once.
The awarded coupon rate was on the lower end of market expectations, a trader likewise said in a text message.
“Average yield and coupon are lower resulting from the continual downward trend of yields this past week or so. Demand was incredibly high, resulting in higher likelihood that the BTr will surpass the P200-billion goal.”
DOLLAR BONDS
Meanwhile, Ms. Almanza said the federal government could tap the offshore debt market within the second half of the 12 months to lift the remaining $2.5 billion from the federal government’s external borrowing plan.
“We now have a remaining $2.5 billion. So, we’re monitoring US dollars because that’s the most cost effective. But timing sensible, we did just issue (global bonds in January).”
In January, the federal government raised P2.75 billion from a triple-tranche dollar-denominated bond offering of 5.5-, 10-, and 25-year notes.
Asked if the federal government could issue offshore bonds within the second half, Ms. Almanza said: “Most likely. We’re also monitoring yen and euro.”
The BTr can be working with the Privatization and Management Office to discover assets the federal government could finance that may fall into the Sukuk category for an Islamic issuance this 12 months.
The BTr first issued Sukuk bonds in December 2023, raising $1 billion from the sale of 5.5-year Sukuk bonds.
Sukuk or Islamic bonds are certificates that represent a proportional undivided ownership right in tangible assets, or a pool of tangible assets. These assets could possibly be in a selected project or investment activity that’s Shari’ah-compliant.
The markup takes the place of interest, which is illegitimate in Islamic law. Murabaha will not be an interest-bearing loan but is an appropriate type of credit sale under Islamic law. A Sukuk al-Murabaha certificate can’t be traded on the secondary market.
Unlike usual bonds, Sukuk bond issuances must adhere to Islamic principles and should be structured to ban elements such interest, uncertainty and investments in businesses that cope with prohibited goods or services.
The federal government goals to lift P308 billion from the domestic market this month or P108 billion via Treasury bills and as much as P200 billion through T-bonds.
The federal government borrows from local and foreign sources to assist fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this 12 months.