MANILA, Philippines – While investors swamped the latest debt exchange by the government, most of them flocked to the longer termed securities on offer as they look at locking funds for the future still seen stable with high growth and low inflation.
Around 65 percent—or P255 billion—in tenders to the current debt swap were for bonds maturing in 2040, or for a term of 25 years, the longest maturity being offered by the government, National Treasurer Roberto Tan said yesterday.
The remaining balance, around P133 billion, wanted to swap for 10-year 2025 securities.
The government is authorized to issue up to P300 billion. Results of the bond swap will be announced today.
“The demand was very encouraging. We are not saying that we will be accepting everything though. It depends on the yield that we will accept,” Tan told reporters after the regular Treasury bill auction.
Factors that will be considered, Tan said, include potential for interest savings for the government, the duration of payments, as well as the extension it will create on the average maturity of state debts.
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Easily though, Tan said the debt swap would lengthen average government maturities by “additional 10 years.”
The Philippines launched its local bond exchange last Aug. 26 in what Finance Secretary Cesar Purisima said was a way to “proactively manage the government’s debt portfolio.”
Aside from the debt swap, the government also put on offer new 10-year bonds, proceeds from which will be used to settle interest payments for those securities that will be exchanged. Tan said “around P10 billion” could be raised from such offer.
Sought for comment, Emilio Neri Jr., an economist at Bank of the Philippine Islands, said the tenders for 25-year bonds could have come from pension and insurance firms which would like to ensure source of funds in the future.
“Of course, the stable macroeconomic environment also has some effect in a sense that investors are confident that growth would remain strong,” Neri said in a phone interview. Economic growth averaged 5.3 percent as of the first half.
Tan agreed, saying the low inflation—which hit a record-low of 0.6 percent in August—could also have been a factor.
“Investors want more efficient pricing for their bonds and then of course, the volatility of the market in a way, puts them in a framework where (they) want to be flexible, that’s why they want liquidity,” he explained.
Meanwhile, the government made a full award of the T-bills offered yesterday. A total of P8 billion in 91-day, P6 billion 182-day, and P6 billion 364-day T-bills were awarded.
Rates fell across the board with tenders reaching P17.41 billion for 91-day, P25.91 billion for six-month and P9.463 billion for one-year papers.
