THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday at lower rates amid healthy appetite for longer tenors on expectations that the Bangko Sentral ng Pilipinas (BSP) will continue to ease its policy stance.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached P67.611 billion or more than twice the amount on offer.
This brought the total outstanding volume for the bond series to P323.6 billion, the Treasury said in a statement.
The bonds, which have a remaining life of seven years and seven months, were awarded at an average rate of 5.973%. Accepted bid yields ranged from 5.9% to 5.984%.
The average rate of the reissued papers declined by 27.6 basis points (bps) from the 6.249% fetched for the series’ last award on Jan. 14 and was also 77.7 bps lower than the 6.75% coupon for the issue.
This was likewise 2.1 bps lower than the 5.994% quoted for the seven-year bond but 1.3 bps above the 5.96% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
Following the oversubscription seen for Tuesday’s offering, the BTr opened its tap facility window to government securities eligible dealers and market makers to raise up to P5 billion more via the bonds at the same average rate fetched during the auction proper.
The Treasury fully awarded the T-bonds as the average rate fetched was lower than the previous reissuance and also broadly in line with comparable secondary market yields, it said.
The full award came as the offering was met with “good demand,” a trader said in a text message.
“Investors seem comfortable extending duration amid the rate cut outlook,” the trader said.
The average auction yield declined ahead of a widely expected BSP rate cut this week and expectations of further easing amid a benign inflation outlook, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Monetary Board will hold its first policy meeting for the year on Feb. 13 (Thursday).
A BusinessWorld poll conducted last week showed that 19 out of 20 analysts expect the BSP to cut its target reverse repurchase rate by 25 bps on Thursday.
This would mark the central bank’s fourth straight 25-bp cut since August and would bring the policy rate to 5.5% from 5.75% currently.
BSP Governor Eli M. Remolona, Jr. earlier said a rate cut is “on the table” at this week’s meeting.
He said they may slash benchmark interest rates by 50 bps this year as “policy insurance” against risks, with the cuts likely to be done in 25-bp increments each in the first and second half.
Philippine headline inflation stood at 2.9% year on year in January, steady from the December print.
This was within the BSP’s 2.5%-3.3% forecast for the month and its 2-4% annual target.
The central bank expects headline inflation to average 3.3% this year under its baseline scenario.
The BSP said following the data release that it will continue to monitor risks to the inflation outlook and maintain a “measured approach” to policy easing.
Mr. Ricafort added that T-bond rates declined to mirror the recent easing in US Treasury yields following various policy statements by US President Donald J. Trump.
The BTr is looking to raise P203 billion from the domestic market this month, or P88 billion from Treasury bills and P115 billion from T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy
