BTr fully awards reissued bonds

THE GOVERNMENT fully awarded the reissued 10-year Treasury bonds (T-bonds) it auctioned off on Wednesday at a lower average rate amid strong demand for higher-yielding longer tenors.

The Bureau of the Treasury (BTr) raised PHP 25 billion as planned from the reissued 10-year bonds it offered on Wednesday as total bids reached PHP 44.492 billion.

The bonds, which have a remaining life of nine years and five months, were awarded at an average rate of 6.142%, with accepted yields ranging from 6.05% to 6.18%.

The average rate of the issue was 23.60 basis points (bps) lower than the 6.378% quoted for the series when it was last offered on March 7 and 60.80 bps below the 6.75% coupon for the issue.

However, this was 1.50 bps higher than the 6.127% quoted for the nine-year bond and 7.50 bps above the 6.067% seen for the same bond series at the secondary market prior to the auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded the reissued 10-year Treasury bonds at today’s auction. With 9 years and 5 months to maturity, the T-bonds (FXTN 10-69) fetched an average rate of 6.142%, lower than the previous average of 6.378% when it was last reissued in March 2023. The auction attracted PHP 44.5 billion in total tenders, 1.8 times the PHP 25-billion offer,” the BTr said in a statement on Wednesday.

“With its decision, the committee raised the full program of PHP 25 billion, bringing the total outstanding volume for the series to PHP 165 billion,” it added.

The T-bonds on offer fetched rates slightly above secondary market levels as the market demanded higher yields as the central bank’s key rate is higher than the rest of the curve, a trader said in a Viber message.

Still, expectations of a pause in the Bangko Sentral ng Pilipinas’ (BSP) tightening caused the paper’s average rate to be lower than the previous award, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BSP last month hiked benchmark interest rates by 25 bps to help bring down elevated inflation.

This brought the yield on its overnight reverse repurchase facility or its key rate to 6.25%.

Since May 2022, the central bank raised borrowing costs by a total of 425 bps.

The Monetary Board’s next meeting is on May 18.

The central bank may consider pausing its monetary tightening next month if April inflation does not accelerate, BSP Governor Felipe M. Medalla said over the weekend.

He said a pause in interest rate increases was possible “if the April CPI (consumer price index) is not higher than the March CPI” or if there is “zero or negative month-on-month inflation.”

Philippine headline inflation eased to 7.6% in March from 8.6% in February.

For the first quarter, inflation averaged 8.3%, higher than the BSP’s 6% forecast and 2-4% target for the year.

“Also, tonight’s US data may have been considered, so some players didn’t want to be aggressive,” the trader added.

March US consumer price index data was scheduled for release overnight.

The BTr wants to raise PHP 160 billion from the domestic market this month, or PHP 60 billion via Treasury bills and PHP 100 billion via T-bonds.

The government borrows from local and external sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — By A.M.C. Sy