BTr to auction 25-yr T-bonds

The Bureau of Treasury (Btr) decided yesterday to auction off its planned 25-year peso-denominated Treasury-bond (T-bond) offering, instead of putting it in a private placement, to allow everybody to participate and bid for the P2-billion offering.

This was announced yesterday by Deputy Treasurer Eduardo Mendiola who explained that the planned 25-year bond offering was supposed to be put in a private placement with HSBC and Banco de Oro as lead arrangers.

Sources, however, said premature announcement of the offering has led to questions about pricing, prompting the government to decide to just do an auction to allow market forces to dictate the rate.

"An auction would set a price that would be driven by market forces," Mendiola said.

Finance Undersecretary Joel Banares said institutional investors have expressed interest in the government’s long-term debt paper given a returning confidence in the local financial markets.

"The difference between the long-term bonds and the Treasury bills have narrowed to just three percentage points as compared to five to six percentage points before," Banares explained.

He said the cost of the 25-year peso-denominated T-bonds is almost the same as that of the 20-year dollar denominated T-bonds but without the foreign exchange risk.

The 20-year dollar-denominated T-bond had a yield of 800 basis points over the comparative US T-bill, which during its flotation gave a yield of about 14 percent.

Pricing for the peso-denominated 25-year T-bonds will only be known on Tuesday next week, when the government has scheduled the auction for the 25-year T-bonds.

Analysts said government expects the issuance of the long-term debt paper to be oversubscribed, especially now that investors are once again finding government-issued debt papers attractive.

They also said the inflow of foreign money which is finding its way into government securities has caused the peso to gain ground against the dollar.