Treasury partially sells 10-year bonds at auction

The Treasury bureau partially awarded 10-year Treasury bonds at yesterday's auction to prevent the rate from going up, with investors seeking a premium for their money. The 10-year paper fetched a coupon rate of 7.75 percent, 2.4 basis points lower than the average rate of 7.774 percent of a comparable debt paper issued in August 2009. Total bids reached P12.84 billion, but the government's auction committee ended up selling only P2.5 billion worth of the bonds to prevent the rate from going up. Had the Treasury fully awarded its P8.5-billion offer, the debt paper would have fetched a coupon rate of 8 percent — 22.6 basis points higher than the comparable paper's 7.774-percent average rate. National Treasurer Roberto Tan said the committee might send the wrong signal to investors if it allowed the rate to go up. He also noted that while the committee could afford to reject all the bids, it wanted to have a new supply of the 10-year paper in the market. "We don't need the cash but we want to provide new supply in the market," he told reporters after the auction. Tan said investors had sought higher returns for their money due to lingering concerns about the government's widening budget deficit. The government expects a budget gap of P293 billion this year, higher than the initial estimate of P233.4 billion and slightly above the expected P290 billion for 2009. Last year's estimated deficit is also above the full-year program of P250 billion but slightly below a previous estimate of P300 billion. To contain the deficit, the government borrows locally by selling Treasury bills and bonds and offshore through global bonds. The government is expected to borrow P110.5 locally this quarter by selling P51 billion worth of Treasury bills and P59.5 billion worth of Treasury bonds — 20 percent higher than a year earlier. Last month, it sold $1.5 billion worth of dollar-denominated bonds, making it the first debt issuer in Asia for the year. — NPA, GMANews.TV