The Philippines: Gov’t makes full award of bonds at higher rate on inflation fears

  • THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on 19 Apr 22 at a higher average rate due to inflation fears and hawkish comments from US Federal Reserve policymakers.
  • The Bureau of the Treasury (BTr) raised PHP35bn as programmed from the reissued 7-year bonds it auctioned off on 19 Apr 22, with bids reaching PHP47.3bn.
  • The debt papers, which have a remaining life of six years and three months, were awarded at an average rate of 5.779%, up by 17.8 basis points (bps) from the 5.601% fetched when they were last sold on 22 Mar 22.
  • The bonds have a coupon rate of 3.75%. The average rate was also higher than the 5.6836% quoted for the 7-year tenor at the secondary market prior to the auction, based on the PHP Bloomberg Valuation Service Reference Rates.
  • National Treasurer Rosalia V. de Leon said that the government made a full award of its T-bond offer at a higher rate due to hawkish comments from Fed officials suggesting a hike of 50 bps to tame rising prices.
  • Meanwhile, a trader in a Viber message said the T-bond auction result came as a surprise as the market was expecting the rate of the tenor to only be between 5.5% and 5.75%.
  • “Bids were higher due to CPI (consumer price index) pressures and hawkish tone of other central banks,” the trader said. The trader added that the 19 Apr 22 auction result may cause the market to be defensive ahead of next week’s 10-year T-bond offer.

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