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 PRESSROOM / NEWS
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 | Republic of the Philippines
DEPARTMENT OF FINANCE
Roxas Boulevard Corner Pablo Ocampo, Sr. Street
Manila 1004
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February 16, 2010
10-YEAR T-BOND AUCTION RESULTS: FEBRUARY 16, 2010
BTr
FPPO-JEP
The national government today did not let the yields of its fresh 10-year Treasury bonds to increase a bit as it made a partial award, capping the coupon rate at a level it found acceptable and aligned with the movement of rates in the secondary market. Panic-stricken market players once again attempted to push up the yields, throwing bids that were way higher than the levels of the secondary market which the Auction Committee deemed to be unacceptable as the government was in no way in a hurry to borrow. Apparently, market players were testing the government and were trying to see if it would borrow at a higher cost which today, government proved otherwise. This gave the bond market a strong signal yet again of its unwillingness to let the interest rates of its long-term debts to rise despite the existing pressures surrounding the domestic economy such as the lingering concerns over the budget deficit, the inflation as well as the pressure building from the side of politics. The national government, in the last two weeks, has implicated that it would not let its interest rates to rise drastically when it made its first rejection of the year on the February 2 T-bond auction that since pulled down secondary market rates.
Given present concerns, market players tend not to hold long-term investments as evident in today’s auction. Although today’s T-bond sale was oversubscribed, the volume was relatively thin when compared with the past auctions, indicating market’s cautious stance and seemingly lack of appetite for the 10-year bonds as this tenor is not as tradable as those with tenors of 3 years, five years or 7 years, with only the insurance companies that are mostly interested on 10-year bonds. Aside from that, market players are waiting for the NG’s government deficit data for 2009 which is set to be released this week as this will most likely determine the direction of interest rates in the coming weeks.
While the rate of the newly issued debt paper dipped as market players competed for the 10-year Treasury bond, the Auction Committee sold just a quarter of the supposed offering of P8.5 billion. At today’s auction, the Auction Committee awarded banks only P2.5 billion worth of the newly issued 10-year note. It capped the yield at 7.750 percent coupon rate, down by 12.5 basis points from 7.875 percent coupon rate during the August 18 auction and down by 26.9 basis points when compared with the 8.019 percent the paper of this tenor would have fetched had it been awarded at the failed October 20 auction. Bids ranged from a high of 7.85 percent to a low of 7.75 percent and an average coupon rate of 7.83 percent. Tenders reached P12.835 billion, more than the offering. Had the government made a full award, the bonds would have fetched at 7.909 percent average coupon rate, only a slight increase when compared with the previous coupon rate thus indicating government’s unwillingness to let its rate to increase even by a tad.
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