By Aaron Michael C. Sy, A reporter
The GOVERNMENT on Wednesday made the first sum of P107.072 bilthe lion in his second offering of new fixed rate Treasury notes (FXTNs) target institutional investors.
The amount collected from these 10-year bonds was more than three times the P30-billion target as the tenders reached P328.467 billion.
New Treasury bonds (T-bonds) fetched a coupon rate of 5.925%, yielding an average yield of 5.893%, according to the results of a rate-setting auction posted on the Treasury Department’s website.
Accepted bid yields ranged from 5.75% to 5.928%.
The coupon rate was 5 basis points (bps) above the 5.875% seen on the same bond series but 0.9 bp below the 5.934% seen on the 10-year notes based on PHP Bloomberg Valuation Service Reference Rates data from Feb. 18 published on the Philippine Dealing System website prior to the auction.
The period for the public offering and the exchange offer for holders of bonds maturing in the next year will end on February 20. The notes are scheduled to be issued on Feb. 23.
In April last year, the government raised P300 billion in 10-year benchmark notes, in addition to the P30-billion program. It initially raised R135 billion in a price-fixing auction.
National Treasurer Sharon P. Almanza told reporters after the auction that they aim to raise at least P200 billion from the issuance but noted that the amount will depend on the demand of the exchange system.
The FXTN offering includes an exchange program for holders of securities maturing on April 8, Sept. 7, Sept. 20, Oct. 20, and Jan. 4, 2027.
Ms Almanza said the coupon rate fetched by the notes was a “reasonable rate” despite investors calling for higher yields ahead of the central bank’s policy meeting on Thursday.
“The demand for 5.95% was high, the concentration of bids was there…. The important thing is to expect that the prices will go down,” he said.
“If we award 5.95%, we don’t need a grant period, since that was already P200 billion.”
All 16 analysts in a BusinessWorld A poll conducted last week expects the Monetary Board to deliver a sixth consecutive 25-bp rate cut at its first meeting of the year on Thursday. If it happens, this will bring the policy rate to 4.25%.
The Bangko Sentral ng Pilipinas lowered the benchmark borrowing cost by an incremental 200 bps since its easing cycle began in August 2024.
Mrs. Almanza said that the severe financial deficit in the country’s financial system also caused the need for a donation following the maturity of the Treasury bond on 16 February.
Chief Expert of Rizal Commercial Banking Corp. Michael L. Ricafort also said in a Viber message that P232.8 billion was deposited into the financial system due to the maturing of seven-year bonds on Feb. 13 added to the requirement for new notes.
The issuance of new fixed rate Treasury notes is part of the Bureau of the Treasury’s (BTr) conto strengthen the release, said Ms. Almanza.
“We do not want to introduce a new ISIN (International Security Identification Number) [bonds] so that the yield curve is not divergent. There are already too many active ISIN ranges [bonds]so we stop [them] then we introduce only one or two [FXTN],” he said.
This year, he said they will release FXTN only once.
The coupon rate awarded was below market expectations, the trader said in a note.
“The yield and coupon rate are low due to the decline in yields in the last week or so. Demand has been incredibly high, leading to a high probability that BTr will exceed the P200-billion target.”
OLD BONDS
Meanwhile, Ms. Almanza said the government could use the foreign debt market in the second half of the year to raise the remaining 2.5 billion in the government’s foreign borrowing program.
“We have a balance of 2.5 billion. So, we are looking at US dollars because they are the cheapest. But timing wise, we just issued (international bonds in January).”
In January, the government raised P2.75 billion in three 5.5-, 10-, and 25-year dollar bonds.
When asked if the government could issue overseas bonds in the second half, Ms. Almanza said: “It is possible that we are monitoring the yen and the euro.”
BTr is also working with the Privatization and Management Office to identify assets that the government may finance that will fall under the Sukuk category of Islamic issuance this year.
BTr first issued Sukuk bonds in December 2023, raising $1 billion from the sale of 5.5-year Sukuk bonds.
Sukuk or Islamic bonds are certificates representing limited ownership rights in tangible assets, or a collection of tangible assets. These assets may be in a specific project or investment activity that complies with Shari’ah.
The mark takes the place of profit, which is illegal in Islamic law. Murabaha is not an interest-bearing loan but is an acceptable form of credit sale under Islamic law. A Sukuk al-Murabaha certificate cannot be sold in the secondary market.
Unlike conventional bonds, the issuance of Sukuk bonds must comply with Islamic principles and must be structured to prevent factors such as interest, uncertainty and investment in businesses that deal in prohibited goods or services.
The government aims to raise P308 billion in the domestic market this month or P108 billion through Treasury bills up to P200 billion through T-bonds.
The government is borrowing from local and foreign sources to help finance its budget deficit, which stands at P1.647 trillion or 5.3% of gross domestic product this year.
