Having previously disposed just a fraction of its inventory of seven-year Treasury bonds (T-bonds), the Bureau of the Treasury (BTr) sold all P15 billion worth of the IOUs at the auction on Tuesday as bid rates finally proved to the agency’s liking.
According to National Treasurer Rosalia V. de Leon, Tuesday’s bids were finally in line with conditions in which the policy rates of the US Federal Reserve (the Fed) and that of the Bangko Sentral ng Pilipinas (BSP) were seen kept at levels where they are at present.
As consequence of that mind-set, the Treasury auction committee received robust demand for the reissued security whose average rate this time around fell 0.9 basis point to
4.51 percent.
“[We saw] healthy demand for the tenor today. Then we also see the rates have fallen. Well, we see the anticipation on the policy-rate meeting [outcome] on Thursday. Again, the rates would be put on hold [and] that’s coming from the Central Bank already,” de Leon told financial reporters.
The Treasury received bids amounting to P33.885 billion or more than twice over-subscribed, forcing the auction committee eventually to reject P18.885 billion.
Apart from a stay on the policy rates of the US Fed and the BSP, de Leon, likewise, said the domestic inflation environment “continues to be very benign” and, thus, the need to thwart attempts by market players to bid the seven-year money higher should that actually
come to pass.
De Leon also said there had been indications from the US Fed that the so-called unwinding of the bond holdings would be done gradually.
“So I think this all converge for the local market to see that the rates should really be lower. There’s really no reason to hike the rates again,” she added.
The T-bond has a remaining life of six years and eight months, and awarded in full as a result of bid rates aligning with internal estimates of the BTr.
At the sale of the same seven-year IOUs in May this year, the Treasury reported bids aggregating only P12.81 billion or lower than the anticipated sale of P15 billion.
In that exercise, the Treasury made a partial award of only P4.046 billion and the rejection of P8.825 billion worth of offers.