Gov’t makes full award of reissued 20-year T-bonds

MANILA, Philippines - The government made yesterday a full award of reissued 20-year Treasury bonds as the debt paper fetched lower yields on hopes of continued drop in inflation.

The Bureau of the Treasury sold P25 billion worth of bonds, maturing in March 2033, at an average rate of 3.855 percent. The yield was 124 basis points lower than the previous rate of 5.095 percent and below secondary market trading levels.

The bonds, with a remaining life of 18.2 percent, attracted a total of P73.46 billion worth of bids from banks, nearly three times the offer size of P25 billion.

Despite the robust demand for low-risk government bonds, the BTR decided to stick to its borrowing program.

Finance Undersecretary and chief economist Gil S. Beltran said investors appetite for long-term government papers was high due to a stable Philippine economy and improving global market conditions.

“The economy remains strong, the world economy is getting a little better and financial markets are calmer this time. There are no tantrums coming from the so-called quantitative easing,” Beltran said.

Beltran also noted that the Philippines, backed by a strong economy, a young and growing population and increasing income, has become the “darling of investors.

“Its an investment haven because the profitability is high, the market is growing fast,” Beltran said.

For the first quarter this year, the government plans to issue P135 billion worth of Treasury bills and bonds to support its expenditure requirements.

The amount is the same size as the government’s borrowings in October to December 2014.

The government intends to source 86 percent of its borrowing requirements from the domestic market while the remaining 14 percent will come come from lenders overseas.

It borrows funds to pay maturing obligations and plug the deficit in its budget.

Foreign borrowings are done through the sale of sovereign bonds in the international capital market and by securing cheap loans, in the form of official development assistance (ODA), from multilateral development institutions.