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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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May 11, 2010
5-YEAR T-BOND AUCTION RESULTS: MAY 11, 2010
BTr
FPPO-JEP
The Bureau of the Treasury today surprised the bond market when despite an increase in the coupon rate; it successfully sold the fresh 5-year Treasury bonds as planned as the increase was aligned with the prevailing rate in the secondary market. The Auction Committee raised P8.5 billion worth of the new 5-year T-bonds for a coupon rate of 6.375 percent. Today’s auction, the first debt sale after Monday’s national and local elections somewhat demonstrated an improved market sentiment as investors showed strong demand, tendering bids more than twice the size of the offering. This gave the government a relief as the coupon rate did not increase that much when compared with the 6.35 percent done deal rate of the five-year debt paper in the secondary market. The rise in the rate was just minimal that it could again be attributed to market fluctuations, prompting therefore the Auction Committee to sell the T-bonds as planned.
The positive sentiment of the market players in today’s sale was mainly driven by the successful outcome of the elections. Market players cheered that the country’s first ever automated elections turned out to be clean, swift and generally peaceful. This somewhat assuaged the supposed upward pressure on the yield and the wait-and-see stance of the market players before the polls as they questioned the credibility of the automated election. But with the outcome turning out to be successful as promised by the COMELEC and the results to be favorable, election-related tensions and concerns eased as manifested on the strong interest of the market players in today’s debt sale.
The government announced last week that inflation remained unchanged in April from 4.4 percent in March. It was lower than the 4.8 percent recorded during the same month last year. The April figure of 4.4% as well as the year-to-date inflation average of 4.3 percent was within the central bank’s forecast range of 3.9 percent to 4.8 percent. BSP, on its last meeting, raised its inflation forecast for 2010 to 5.1 percent from 4.64 percent and for 2011 to 3.7 percent from 3.45 percent. But the adjustments still fall within target for 2010 and 2011. BSP also made some pronouncements that it would possibly keep its rates low until the first half of this year on the back of still benign inflation, boosting all the more investors’ sentiment.
With a coupon rate a little over the prevailing market rate, the Auction Committee sold as planned today worth P8.5 billion. The debt paper yielded a coupon rate of 6.375 percent, 2.5 basis points higher than the secondary market rate of 6.35 percent for the five year debt. Compared with the 6.090 percent average rate this paper got when auctioned last March 16, the increase was even higher at 28.5 basis points. Bids ranged from a low of 6.125 percent to a high of 6.490 percent. The sale was slightly more than twice oversubscribed with tenders reaching P17.02 billion against the offering indicating market’s strong demand. For the second quarter of 2010, the government plans to borrow a total of P107 billion worth of T-bills and T-bonds from the domestic market, lower than the P110.5 billion programmed borrowing in the previous quarter.
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