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7-year money lifts on partial award

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Demand for government securities remained tepid on Tuesday when the Bureau of the Treasury (BTr) agreed to sell just a fraction of what it requires as the rate for seven-year money proved too expensive for the auction committee.

The rates offered for seven-year Treasury bonds were at triple-digit levels, which forced the BTr to cap the rate at 7.25 percent and be in a position to award at least a small fraction of its full requirement.

As a consequence, the seven-year T-bond rate averaged 7.085 percent representing a 110.9 basis point jump from only 5.976 percent when the IOU were sold last.

This developed even though demand further retreated to P13.9 billion P14.382 billion when the bonds were last on the auction block.

“The last time we awarded this security, at least partially, was on 13 June (and since then) there have been several actions or rate hikes from the BSP (Bangko Sentral ng Pilipinas),” Deputy Treasurer Erwin Sta. Ana told reporters.

He explained the award considered the fact that a “reasonable cut off rate” had to be made at some point.

“We run internal simulations as well and we think the average rate is still acceptable for the Treasury and the auction committee as well,” he said.

The Deputy Treasurer also validated reports of selling another batch of ROP, market language for bonds sold by the Republic of the Philippines.

According to him, the Cabinet economic cluster to which Treasury officials play key roles “are closely looking at that space this fourth quarter.”

He also told reporters a Philippine delegation to London is even now testing the waters on the feasibility of a euro bond sale, a market vastly different from the country’s traditional sources of financing such as the panda, samurai and the global bond markets in the US.

In all, the auction committee awarded only P5.730 billion of the P13.9 billion tenders, slightly lower than the P15 billion offer.

In a related event, the BTr also bared plans to raise P270 billion through the sale of its Treasury bills and bonds (T-bills and T-bonds) in the fourth quarter, slightly lower than the programmed P300 billion for the current quarter.

Between October to December, 12 auctions will be held for 91-, 182- and 364-day tenor T-bills with P15 billion price cut, retaining the same offer in the current quarter.

On the same note, the government will also offer P15 billion worth of T-bonds with 5-, 7- and 10-year tenors in six auctions.

“Basically, it’s the same approach as the last quarter (with) same volume (and) same frequency (as) there are some weeks in December that will not be productive,” Sta. Ana said.

As of end-July this year, P227.71 billion had been raised by the Treasury from its T-bills issuances while a total of P86.054 billion had been generated from recent panda and samurai bond sales with P12.014 billion and P74.040 billion, respectively.

This, along with its borrowings, is expected to complement the tax revenues supporting the government’s ambitious Build, Build, Build program.

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