The government fully provides new 20-year bonds



By Karl Angelo N. Vidal, Reporter

GOVERNMENT collects P20 billion through 20-year Treasury bonds (T-bonds) which were auctioned on Tuesday due to strong demand as investors continue to park their funds in longer securities amid easing domestic inflation expectations and economic development abroad.

The Bureau of Treasury (BTr) yesterday gave a full award for the 20-year debt auctioned on Tuesday, accepting offers of P50,221 billion, more than double the amount the government wants to raise.

Debt certificates were taken at 6.75% with an average rate of 6.716%, 26.3 basis points lower than 6.979% taken when the last 20-year bonds were issued on June 19, 2018.

To take advantage of yesterday's strong demand, after the auction, the Ministry of Finance decided to open tap and over-the-counter (OTC) facilities from 2 to 4 p.m.

The tap facility aims to increase the other P10 billion in the same 20-year newspaper, which is offered to 10 financial institutions that have been called market makers.

The Ministry of Finance also opened OTC sales for 20-year bonds to state-owned and tax-controlled companies.

Based on the Bloomberg PHP Assessment Service Reference Rate, the 20-year IOU was quoted at 6.83% yesterday.

After the auction, National Treasurer Rosalia V. De Leon said BTr had seen good results in the auction since the beginning of the year as investor appetite flocked to the end of a longer curve.

"We also see a shift in appetite in the long term because investors are trying to maximize their results, given that yields will decline. Even inflation is expected to tend to fall to the target, "said Ms. De Leon told reporters yesterday.

Based on the latest data, main inflation fell to 5.1% in December from 6% calculated in the previous month because food and transportation prices grew more slowly.

For 2018, inflation averages 5.2% – faster than the target range of the central bank's 2-4% and the highest since 2008 8.2%.

Bangko Sentral ng Pilipinas estimates that inflation will return to "below four percent around the end of Q1 2019," deep within the target band.

"At the same time, [we’re also seeing that] The Fed (US Federal Reserve) will be very patient and on the sidelines watching the data, "De Leon added, noting that market participants also took into account the factor of the global Monetary Fund's (IMF) global growth rating.

The IMF cut its growth forecast for 2019 by 0.2 percentage points to 3.5%, mainly due to trade disputes between the United States and China, and the possibility of Britain's exit from the European Union without agreement.

Wanted to comment, a bond trader said in a text message that the auction was "pretty good" because market players grew more confident about the picture of domestic inflation.

The government plans to increase the P360 billion this quarter through domestic means, split into P240 billion through 12 weekly Treasury bills and P120 billion through six two-week T-bond auctions.

The country wants to borrow P1,89 trillion in 2019 to fund its expenditure plan. Of this amount, 75% will come from domestic sources while the rest will be from foreign creditors.

However, the 2019 national budget has not been ratified by Congress and signed into law, so that the fiscal program depends so far.

Meanwhile, De Leon said that the Ministry of Finance was "watching over opportunities" to offer foreign currency denominated instruments and was prepared to easily issue anything if such a window was opened.

"We have to be nimble. For example, if there are strong reasons for us to go to the market again, such as in the dollar from the second to third quarters considering where the exchange rate is, then we also have to assess opportunities, "he said.

The National Treasurer said the issuance of yuan-denominated or "panda" bonds was "on the table" as part of the government's move to diversify its funding sources.

"Bank of China, siya ‘yung sa (will be) leader [issuer], finally magkakaroon naman ng (there will be) seller banks, "De Leon said.

Meanwhile, BTr also "did some sounding the market" from five banks before entering the Japanese market to offer yen-denominated bonds or "samurai".

The Ministry of Finance previously said that the government intends to return to the foreign bond market 12-18 months after the issuance of March panda bonds and yen-denominated bonds last August.


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