The government has raised fresh funds from the sale of 25-year Treasury bonds on Tuesday on the back of the institutional investors’ demand for the long-term debt papers.
National Treasurer Roberto Tan said the auction was “very good” as there were “lots of demand from insurance firms and pension institutions for long-term money.”

The interest rates that the government securities fetched on Tuesday were still above the 8.5 percent when there were last auctioned off in 2007, “but that’s not relevant anymore. Those were the most liquid time,” Tan said.

During the auction, the government fully awarded to bidders the P6.5-billion worth of debt papers that fetched an average rate of 9.080 percent, or 17 basis points lower than its coupon rate of 9.250 percent.
Bids ranged from a low of 8.75 percent to a high of 9.25 percent, with the demand reaching P14.495 billion, or twice higher than the total on offer.

The result, according to Tan, was “way below” the secondary market rate.

The rate for the 25-year Treasury bonds was last quoted at 9.75 percent in the secondary market rate.

The government was forced to resort to more borrowings this year after it raised its budget deficit ceiling to P250 billion from the previous P199.2 billion on greater public spending to prop up the domestic economy amid a global slowdown.

It entered the international capital markets through two global bond issuances worth about $2 billion. It is also planning to undertake a Samurai bond offering before the yearends.

The Department of Finance earlier said it might push back the plan to tap the Japanese bond market this year if the two governments “failed to fill in the gap.”

A Samurai bond is a yen-denominated debt paper issued in Japan by a foreign borrower. Borrowing from the Japanese through the sale of bonds in their market surged during that country’s so-called lost decade, when the world’s second-biggest economy fell into deflation, characterized by ultra-low interest rates and a flood of money that had nowhere else to go.

Finance Secretary Margarito Teves had said that the government would have to postpone the Samurai bond offering to next year if Manila and the Japan Bank for International Cooperation would be unable to agree on the guarantee fee the bank would charge.

The Philippines is looking to raise $2 billion in foreign bond issues next year to help finance its budget deficit.

Lailany P. Gomez