Economy · August 6, 2022

Treasury auction marked by the demand for long tenors

The Bureau of the Treasury allotted a full £ 35 billion in new 3.5-year T-bonds on Tuesday as strong demand for longer maturities continued on Tuesday.

Attracting total offers of £ 106.3 billion, the bonds were over-subscribed more than three times.

Due to overwhelming demand for the bond, the coupon rate stood at 5.25%, lower than the comparable secondary market rates of 5.363% for the bond and 5.489% for the 4-year bond.

National treasurer Rosalia V. De Leon attributed the strong demand to the repayment of maturing debt securities.

“Impressive auction results with strong demand coupled with lower rates than secondary level compared to a similar tenor,” said De Leon. “P37 billion in ransom has also found a home in today’s offer.”

To take advantage of the overflowing demand, the treasurer said he had opened the tap plant window for another £ 10 billion offer.

In recent auctions, investors sought higher yields as Filipino and American monetary officials raised rates to tame inflation.

Locally, inflation hit a three-year high in June at 6.1%, bringing the year-to-date figure to 4.4%. This is beyond the original target range for Bangkok Sentral ng Pilipinas inflation between 2% and 4%. For this month, the Treasury aims to borrow P215 billion through the local debt market next month. Of the total, 140 billion in Treasury bills (T-Bonds) and another 75 billion P7 (T-bills) will be offered.

Since the start of the auction this week, the Treasury has raised £ 50 billion.

At the end of May, the national government’s outstanding debt fell to £ 12.5 trillion from a record £ 12.76 trillion at the end of April due to the repayment of a short-term zero-interest loan of £ 300 billion. pounds from BSP.

The national government’s debt-to-GDP ratio also rose to a 17-year high to 63.5%, above the 60% threshold internationally recommended by multilateral lenders for emerging markets such as the Philippines. It is also the highest since the country’s debt-to-GDP ratio reached 65.7% in 2005 under the Arroyo administration.