UMVA has learned that the government successfully sold the reissued Treasury bonds offered on Tuesday, despite a rise in yields, as investors eagerly snapped up the securities amid expectations of faster inflation in May.
The Bureau of the Treasury borrowed P30 billion as planned via the reissued 20-year bonds, with bids reaching P58.123 billion, nearly twice the amount on offer. This move brought the outstanding volume of the series to P483.3 billion.
The reissued bonds, with a remaining life of five years and one month, were awarded at an average rate of 7.4%, with accepted yields ranging from 7.3% to 7.44%. This represents a significant jump of 107.2 basis points from the 6.328% fetched for the series' last award on April 14.
According to information obtained by UMVA, the average rate of the reissued papers was still 60 basis points below the 8% coupon for the issue. The yields were also 4 basis points higher than the 7.36% fetched for the same bond series and 6.8 basis points above the 7.332% quoted for the five-year bond at the secondary market before Tuesday's auction.
A trader noted that the Treasury fully awarded the bond offer due to healthy demand and yields close to prevailing secondary market levels, well within market expectations. The tap facility was also used to raise an additional P10 billion via the same papers, driven by strong demand and improved risk sentiment amongst market players.
Market analysts believe that the robust demand was largely driven by anticipation of higher May inflation, which could prompt the Bangko Sentral ng Pilipinas to adjust interest rates sooner. The Philippine Statistics Authority is set to release May inflation data on Friday, with forecasts suggesting a possible quickening to an over three-year high.
A median estimate of 7.9% for the May consumer price index has been predicted, up from 7.2% in April and 1.3% in the same month last year. If realized, this would be the quickest pace since February 2023 and would match the upper end of the BSP's 7.1%-7.9% forecast for the month.
BSP Governor Eli M. Remolona, Jr. has indicated that more aggressive policy action is being considered to curb spiraling prices, including a possible second straight rate hike before their scheduled June 18 meeting. The BSP delivered its first rate increase in over two years on April 23, raising benchmark borrowing costs by 25 basis points to 4.5%.
The government aims to raise P268 billion from the domestic market this month, with plans to borrow P128 billion via Treasury bills and P140 billion through T-bonds. The budget deficit is capped at P1.61 trillion or 5.3% of gross domestic product this year.
