By Aaron Michael C. Cy, reporter
The government raised an initial P107.072 billion on WednesdaySingh on his second visit new fixed rate treasury notes (FXTN) which target institutional investors.
The amount raised for the 10-year documents was more than three times the initial P30-billion target as tenders reached P328.467 billion.
Results of the rate-setting auction posted on the Treasury's website show that new Treasury bonds (T-bonds) achieved a coupon rate of 5.925%, yielding an average rate of 5.893%.
The accepted bid yields ranged from 5.75% to 5.928%.
The coupon rate was 5 basis points (bps) higher than the 5.875% seen for the same bond series, but 0.9 bps lower than the 5.934% seen for 10-year notes, based on PHP Bloomberg Valuation Service reference rate data published on Feb. 18 on the Philippine Dealing System's website ahead of the auction.
The public offering period as well as the exchange offer for holders of bonds maturing next year will end on February 20. The notes are to be issued on February 23.
In April last year, the government raised P300 billion through new 10-year benchmark notes, well above the P30-billion program. It had initially raised P135 billion from the rate-setting auction.
National Treasurer Sharon P. Almanza told reporters after the auction that they aimed to raise at least P200 billion from the issue, but added that the total amount would also depend on demand for the exchange program.
FXTN's offering includes an exchange program for holders of securities maturing on April 8, September 7, September 20, October 20 and January 4, 2027.
Ms Almanza said the coupon rate received by the notes was a “reasonable rate” despite investors seeking higher yields ahead of the central bank's policy meeting on Thursday.
“Demand for 5.95% was high, there was a density of bids… and the main thing is the expectation that rates will still go down,” he said.
“If we awarded at 5.95%, we don’t need the offer period because that was already P200 billion.”
All 16 analyzers in one businessworld A survey conducted last week expected the Monetary Board to make a sixth consecutive 25-bp cut at its first meeting of the year on Thursday. If this is realized, it would take the policy rate to 4.25%.
The Bangko Sentral ng Pilipinas has reduced benchmark borrowing costs by a cumulative 200 bps since the start of the easing cycle in August 2024.
Strong liquidity in the country's financial system also boosted demand for the offering following the maturity of Treasury bonds on Feb. 16, Ms. Almanza said.
Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort also said in a Viber message that the maturity of seven-year bonds on Feb. 13 brought P232.8 billion of liquidity into the financial system, boosting demand for the new notes.
The offering of new fixed-rate Treasury notes is part of the Treasury Bureau (BTR) ThiefStrengthening of issues, Ms. Almanza said.
“We do not want to introduce a new ISIN (International Securities Identification Number).” [bonds] So that the yield curve is not broken. There are already many active ISIN chains [bonds]That's why we're retiring [them] And then we're just introducing one or two [FXTN],” He said.
For this year, they said they will only release FXTN once.
One trader said in a text message that the coupon rate offered was below market expectations.
“The average yield and coupon are low due to a steady decline in yields over the past week. Demand was incredibly high, making it more likely that BTR will surpass the P200-billion target.”
dollar bond
Meanwhile, Ms Almanza said the government could use the offshore debt market in the second half of the year to raise the remaining $2.5 billion from its external borrowing plan.
“We have the remaining $2.5 billion. So, we are monitoring the US dollar because it is the cheapest. But timing wise, we have just issued (global bonds in January).
In January, the government raised P2.75 billion from a triple-tranche dollar-denominated bond offering of 5.5-, 10- and 25-year notes.
Asked if the government might issue offshore bonds in the second half, Ms Almanza said: “Possibly. We are also looking at the yen and the euro.”
BTR is also working with the Office of Privatization and Management to identify assets that the government can finance Sukuk category for 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 that represent proportional undivided ownership rights in a tangible asset, or a pool of tangible assets. These assets may be in a specific project or investment activity that is Shariah compliant.
Markup replaces interest, which is illegal in Islamic law. Murabaha is not an interest-bearing loan, but an acceptable form of loan sale under Islamic law. Sukuk Al-Murabaha Certificates cannot be traded in the secondary market.
Unlike ordinary bonds, the issuance of Sukuk bonds must adhere to Islamic principles and be structured to restrict elements such as interest, uncertainty and investment in businesses dealing in prohibited goods or services.
The government aims to raise up to P308 billion from the domestic market this month or P108 billion through treasury bills and P200 billion through T-bonds.
The government borrows from local and foreign sources to finance its budget deficit, which this year stands at P1.647 trillion, or 5.3% of GDP.