Local creditors favor longer-dated debt securities amid high yields

MANILA, Philippines—Domestic creditors have turned to longer-term government securities to take advantage of the current high interest rate environment.

The Bureau of the Treasury (BTr) on Tuesday (July 19th) raised all of the 35 billion pesos it wanted to borrow through reissued 10-year Treasury bonds.

These IOUs, issued for the first time last month, this time yielded an average annual rate of 6.865%, below the initial coupon of 7.25%.

Bid rates reached a high of 6.89% and a low of 6.8%.

In the secondary market, the same Treasuries were also valued at 6.969%, while other 10-year bonds were trading at 6.916%.

Government Securities Eligible Brokers (GSED) wanted to lend BTr a total of 123.3 billion pesos, 3.5 times more than its offer, prompting BTr to open its payment facility window for allocate an additional 20 billion pesos in this series of bonds to 11 GSED. market makers.

On Tuesday, the BTr had raised 70 billion pesos through debt securities maturing in June 2032.

“High demand is an understatement in the auction,” said National Treasurer Rosalia de Leon.

“The long-term appetite comes from a good recovery in yields, especially for pension funds to lock in high rates,” De Leon said.

Interest rates around the world are rising as central banks aggressively raise policy rates to stop high global inflation.

When asked if the BTr would prefer to issue longer maturities in the future, De Leon replied that the Treasury was inclined to always stretch the maturity, subject to a reasonable rate.

The BTr will offer a 14-year bond, the longest in a while, next week.


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John A. Bogar