Mixed Fed messages lead to partial bond award

THE GOVERNMENT made a partial award of its dual-tranche offer of Treasury bonds (T-bonds) on Tuesday amid weak demand for the longer tenor as several US Federal Reserve officials said they remain cautious about further policy easing.

- — Aaron Michael C. Sy with Reuters

The Bureau of the Treasury (BTr) raised just P26.848 billion via its dual-tenor T-bond offer, below the P35-billion plan, with total bids reaching P63.666 billion. This came as it made a partial award of the longer tenor it placed on the auction due to weak market appetite.

Broken down, the Treasury borrowed the programmed P10 billion via the reissued seven-year bonds if auctioned off, with total bids reaching P37.924 billion or almost four times the amount on offer.

This brought the total outstanding volume for the bond series to P361.4 billion.

The bonds, which have a remaining life of two years and seven months, were awarded at an average rate of 5.605%. Accepted yields ranged from 5.6% to 5.61%.

The average rate of the reissued papers went down by 2.9 basis points (bps) from the 5.634% fetched for the series’ last award on Aug. 27 but was 198 bps above the 3.625% coupon for the issue.

This was also 0.5 bp above the 5.6% fetched for the same bond series but 5.6 bps lower than the 5.661% quoted for the three-year bond — the benchmark tenor closest to the remaining life of the issue — at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.