Domestic Bonds

Borrowing continues weeks before Duterte’s departure: another $35 billion from local bonds

Treasury Office

Treasury Office (From the office’s Facebook account)

MANILA, Philippines—The Bureau of the Treasury (BTr) on Wednesday (May 4) borrowed 35 billion pesos through three-year reissued bonds at a higher yield of 4.598 percent.

When these Treasuries, maturing in April 2025, were first offered last month, they secured a coupon rate of 4.25%. In the secondary market, three-year Treasury bills were priced at 4.139-4.381%.

Concessionaires eligible for government securities (GSED) or domestic creditors bid for these IOUs at a maximum of 4.85% and a minimum of 4.3%.

“Markets brace for a hawkish pivot from the US Federal Reserve, with [expectations of] a 50 basis point (bp) rate hike alongside a balance sheet reduction to fight inflation,” hitting 40-year highs in the United States, National Treasurer Rosalia de Leon said.

Locally, De Leon pointed to forecasts putting April inflation above the Bangko Sentral ng Pilipinas (BSP) target range of 2-4% manageable price hikes, making the market jittery.

It didn’t help that Governor Benjamin Diokno had already “issued a warning that [the BSP] can start hiking [interest rates] in June,” added De Leon.

De Leon nevertheless noted that during the previous episode of high inflation in 2018, three-year debt securities had a higher average yield of 4.79%.

The auction was oversubscribed as GSED bid a total of 41.5 billion pesos. To date, BTr has raised a cumulative amount of 60.8 billion pesos from this series of bonds.

TSB

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