Rate on 5-year Treasury bonds down to 6.090%

MANILA, Philippines - The interest rate on the government’s five-year Treasury bonds (T-bonds) once again fell during yesterday’s auction on the back of a strong investor appetite for government debt papers.

The average rate of the five-year T-bond stood at 6.090 percent or 14.3 basis points lower than the 6.233 percent fetched during a previous auction. Bids ranged from six to 6.100 percent.

Total tenders reached P27.010 billion or more than three times the P8.5 billion offering, allowing the government to go for a full award.

National Treasurer Roberto Tan said yesterday’s auction results reflected the high level of liquidity in the market. This, he said, means that it would be very advantageous for government-owned and controlled corporations to issue bonds at this time.

“This would be a good time for corporate issuances,” Tan told reporters after the auction.

Last week, the Home Development Mutual Fund (HDMF) or Pag-IBIG Fund issued P11.963 billion in five-year bonds, proceeds of which would be used to refinance existing debts and fund ongoing programs. Pag-IBIG is the state-owned agency that provides affordable home financing to members.

It also provides personal and other emergency loans.

The Pag-IBIG bonds serve as alternative compliance by banks with the Agri-Agra Law and counts as reserve assets of insurance companies and compliance with the Urban Housing Development Act.

Another state-run agency that is planning to issue bonds soon is the Home Guaranty Corp. (HGC), a government-owned and controlled corporation mandated by law to extend guarantee cover to all bond issuances of other state-run firms. HGC hopes to tap the domestic market by April.

The agency is still waiting for the greenlight from the Department of Finance to issue P5.5 billion in 10-year bonds which had been planned as early as last year. Proceeds would be used to refinance P3 billion in maturing debt while the balance would be used to build up the agency’s reserves.

Tan said there are a number of other GOCCs that are seeking the DOF’s go signal to issue bonds as they want to take advantage of the cash-rich domestic market.

“Some of them are looking issuing bonds in April,” he said but declined to name which GOCCs are eyeing domestic issuances this year.