The Bureau of the Treasury (BTr) raised an initial P135 billion during the price-setting auc-tion for the new 10-year treasury notes on Tuesday.
In a statement, the BTr said demand for the IOUs reached P197.305 billion, more than six times the minimum principal amount of P30 billion, prompting the BTr to upsize the ac-cepted amount for the auction.
The government security maturing in 2035 fetched a coupon rate of 6.375 percent, higher than the Bloomberg Valuation Service (BVAL) reference rate of 6.271 percent for 10-year notes.
The treasury notes will remain available to the investing public through qualified dealers from April 15 to 24, unless earlier terminated by the BTr, at a minimum in-vestment of P10 million and P1 million increments thereafter.
The BTr said the extended offer period format marks the first for a non-retail bond is-suance as the bureau seeks to establish a new avenue for building liquid benchmarks.
The format of an extended offer period provides more flexibility for market partici-pants to have immediate pricing guidance on the security and more time to place or-ders to build ro-bust volume, the bureau said.
Chelsea Vanessa Lim, fixed income portfolio manager at Sun Life, told Malaya Busi-ness Insight the BTr likely set a 6.375 percent coupon rate to be able to award a higher volume.
“Aside from the attractive coupon of 6.375 percent, strong demand in the auction can be attributed to the favorable outlook for bonds. Yields will likely trend lower in the near-term as inflation is expected to stay within target, while the BSP (Bangko Sentral ng Pilipinas) is looking to ease policy rates further,” she said.
The BTr is expected to raise P200 billion to P300 billion from this auction, Lim added.
For his part, John Paolo Rivera, a senior research fellow at the Philippine Institute for Devel-opment Studies, said strong demand for 10-year notes reflects investor interest in locking in yields ahead of possible rate cuts, as well as confidence in the govern-ment’s credit pro-file.
“The P135 billion raised in the auction is substantial, and the total amount including … the public offer and possible oversubscription could reach or exceed P200 billion, depending on market appetite,” Rivera said.
“The coupon rate of 6.375 percent, slightly higher than the BVAL, suggests the BTr provided a small premium to attract long-term investors, likely to support a strong take-up and ena-ble larger funding,” he added.
The Development Bank of the Philippines and the Land Bank of the Philippines are the joint lead Issue managers, with BDO Capital & Investment Corp., BPI Capital Corp., China Bank Capital Corp., First Metro Investment Corp., PNB Capital and Investment Corp. and Securi-ty Bank Capital Investment Corp. as joint issue managers.
