5-yr T-bonds fetch 4.125%

MANILA, Philippines - The government’s local borrowing cost declined yesterday as new five-year Treasury bonds (T-bonds) fetched a coupon rate of 4.125 percent.

This is significantly lower than the coupon rate of a similar float issued in July of 4.625 percent.

In a rush of liquidity that has characterized the market for the past several months, offers from banks reached P47.645 billion, more than five times the P9-billion offered by the Treasury.

Deputy Treasurer Eduardo Mendiola attributed the strong investor appetite to a host of factors including a stable macroeconomic environment, low October inflation and  the recent credit rating upgrade earned by the Philippines.

“With the market’s opinion on the macroeconomic environment such as the recent ratings upgrade, people are encourage to invest,” Mendiola told reporters after the auction.

Moody’s Investors Service upgraded the country’s foreign and local bond ratings to Ba1 from Ba2 last month, citing the country’s improved economic performance and resilience to global uncertainties as well as prospects for growth in the medium term.

The news of a low inflation rate in October also boosted investor appetite for government debt papers.

The National Statistics Office (NSO) reported yesterday that the October inflation slowed to a four-month low of 3.1 percent from 3.6 percent in September and June’s 2.8 percent.

Now awash with cash, the Bureau of the Treasury may trim its borrowing program in the first semester of next year, Mendiola said.

 “We may reduce the borrowing program next semester. We still have to review that. We will probably be reducing the auction size for both T-bonds and Treasury bills. Definitely, given the excess liquidity, there’s room to reduce the auction size,” Mendiola said.

He said the Treasury could no longer deviate from the fourth quarter debt plan because this has already been programmed and taken into account by the banks.

The government has programmed to borrow P90 billion in the fourth quarter, lower than the third quarter borrowing program of P108 billion, the second quarter debt plan of P106 billion and first quarter’s P117 billion.