Reissued 3-year bonds fetch lower rates

MANILA, Philippines — Reissued three-year bonds yesterday fetched lower rates amid expectations of lower domestic inflation and further monetary policy easing, the Bureau of the Treasury (BTr) reported yesterday.

During yesterday’s auction, securities with maturing life span of two years and eight months secured an average rate of 3.961 percent, 84.2 basis points lower than the 4.803 percent recorded in the previous auction.

Total tenders reached P56.649 billion, almost three times larger than the P20 billion offer size, which was fully awarded.

National Treasurer Rosalia De Leon said the results of the auction was “expected” given the US Federal Reserve’s pronouncements amid the anticipated slowdown in the global economy.

“As expected, (this is) coming after what we’ve heard from (US Fed chairman Jerome) Powell during the Jackson Hole speech. We see that the Fed will be acting appropriately given the slowdown in the global economy,” De Leon said.

De Leon attributed the decline to the stronger liquidity, as well as the market’s anticipation of further monetary easing on the part of the Bangko Sentral ng Pilipinas (BSP) amid slower inflation.

“There’s also the expectation of more easing coming from the BSP, including a possible rate cut when they meet again during the Monetary Board discussions in September,” De Leon said, adding that “we have a redemption of about P18 billion for the week, so it’s supplying more liquidity to the market.”

Meanwhile, De Leon said the Treasury is exploring new structures, such as prize bonds, for future fund raising activity.

“We’ve already discussed this before that we might, we’ll be looking at some possible structures like what others have also been doing. For instance, Pakistan, they have a prize bond. So on top of the usual coupon that you get, there’s also an opportunity for you to win, there’s like a draw,” De Leon said.

“But that’s something we still need to explore further, evaluate in terms of the requirements like infrastructure, and also in terms of the legal issues that may come up,” she said.

The national treasurer also hinted that foreign borrowings for next year may come from the usual offshore markets, such as the US, China, Japan and Europe.

“There’s no definitive allocation or distribution on how much we will be topping for the offshore issuances but definitely, it would be our usual issues to provide additional liquidity--the dollar, the panda, the yen and the euro,” she said.