The Bureau of the Treasury (BTr) made a partial award for the seven-year treasury bonds auctioned yesterday as it capped rates at secondary market level.
The auction was oversubscribed at P52.7 billion, but the committee only raised P27.2 billion out of the P30 billion offering.
“It’s a good turnout. We were able to raise more than P27 billion in this auction. The approach of the auction committee was to award at a rate that is close to where the security is in the secondary market,” Erwin Sta. Ana, deputy treasurer, said after the auction at the BTr office in Manila yesterday.
The sale of the government securities fetched a rate of 4.732 percent, 41 basis points higher than the previous average of 4.32 percent.
“In the morning session we observed that the security was trading at 4.7 percent, so that’s a very important input in the deliberation of the committee as to where we should award this particular auction,” Sta. Ana said.
“We have observed that over the past couple of weeks, there has been an uptick in interest rates, and basically these are brought about by inflationary pressures. The treasurer mentioned yesterday the market may be pricing the inflationary impact of the Taal volcano eruption. Of course, there’s always that risk on oil. Although now it is a little bit stabilized.
It’s really more of the inflationary environment that we feel that led to this level,” he added.
Meanwhile, Sta. Ana said the BTr has had successful calls with select investors and updates from the banks for its planned euro-bond issuance.
“(This) indicates good, a highly successful initial feedback from investors, not only in Europe but also in Asia. So, we have seen a diverse order book so far; although that’s just initial expressions of interest,” he said, adding yesterday that the agency will have an important call in the afternoon which will be considered in the decision whether to go ahead with the issuance.
Sta. Ana said the government is looking at raising at least a benchmark size per tenor, for the three-year and nine-year euro-bonds, or a minimum of $500 million each.
“No size yet, we’re looking at a benchmark size per tenor, but definitely the final result or the final size will have to be dependent on the orders. A benchmark size in international capital market transactions would be about 500 million US dollars equivalent. We also can upsize if there’s ample demand. So that’s left to be seen,” Sta. Ana said.
“Based on the initial feedback, I think there are a group of investors that are more leaning towards the three-year, and there is a more mainstream kind of fund investor group in the nine-year,” he added.
According to Sta. Ana, BTr has gotten all the necessary approvals for all its commercial issuances in the international debt capital markets.
Asked about the dollar-issuance, he said: “We can do some sort of a back-to-back, also (we’re just on) a wait-and-see or monitor the US market some more. There have been lots of issuances in that space so we’ll see from a supply perspective also whether it’s time to go. It’s really more of a timing now.”
He added the government is also looking at issuing Samurai and Panda bonds this year which could all possibly fall within the first half of the year, but “remain subject to market conditions.”
