Demand for long-term debt securities increases

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MANILA, Philippines – Demand for long-term government securities picked up yesterday, allowing the government to borrow an additional 35 billion pesos in treasury bills (T-bonds) at rates below secondary market rates.

The Treasury Office fully allocated 35 billion pesos worth of reissued 14-year Treasury bonds. T-bonds earned an average return of 6.894% from a low of 6.75% and a high of 6.949%.

The rate was 8.8 basis points lower than the BVAL benchmark rate, which is the standard for securities, of 6.982% for the 14-year bond.

This rate is also lower than the initial coupon rate of 8.125% when the Treasury bonds were first issued.

Demand for the securities attracted P93.998 billion, oversubscribing the auction by 2.69 times. The maturity date of the offer is set at December 16, 2035.

“We saw a repeat of strong long-term interest, with an increase in the attractiveness of yield. Rates were below secondary and the market asked for no maturity or illiquidity premium,” said said National Treasurer Rosalia de Leon.

The Treasury also opened the tap for 10 billion pesos on strong volume demand and reasonable tariffs.

De Leon said the borrowing program for August would likely include long tenors given past auction results.

The Treasury has not yet released the timing of Treasury bill and Treasury bond issues for next month.

De Leon said the government is inclined to always stretch the maturity subject to a reasonable rate.

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John A. Bogar