BTr makes full award of reissued 10-year T-bonds at lower yields

The government made a full award of the reissued Treasury bonds (T-bonds) it offered on Monday at a lower rate due to market expectations that the Bangko Sentral ng Pilipinas (BSP) will keep borrowing costs steady at its policy meeting this week.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached PHP 66.719 billion or more than twice the amount on offer.

The bonds, which have a remaining life of nine years and 11 months, were awarded at an average rate of 6.42%, with accepted yields ranging from 6.35% to 6.448%.

The average rate of the reissued bonds was 13.8 basis points (bps) lower than the 6.558% quoted for the papers when they were last offered on Aug. 15. It was also 20.5 bps below the 6.625% coupon for the series.

The average rate was likewise 2.1 bps lower than the 6.441% quoted for the 10-year bond, but 0.3 bp above the 6.417% 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 Treasury.

“The Auction Committee fully awarded the reissued 10-year Treasury Bonds at today’s auction. With a remaining term of 9 years and 11 months, the reissued bond series 10-71 fetched an average rate of 6.420%, lower than the original coupon rate of 6.625% set on its original issuance in August 2023,” the BTr said in a statement on Tuesday.

“The auction was 2.2 times oversubscribed with total tenders reaching PHP 66.7 billion. With its decision, the committee raised the full program of PHP 30 billion, bringing the total outstanding volume for the series to PHP 60 billion,” it added.

The T-bonds fetched lower yields as the BSP is widely expected to keep its policy rate steady this week, a trader said in an e-mail.

A BusinessWorld poll conducted last week showed 14 of 17 analysts expect the Monetary Board to maintain the policy rate at a near 16-year high of 6.25% at its meeting on Thursday.

However, three analysts see the BSP raising borrowing costs by 25 bps at their meeting as a preemptive measure due to growing inflationary pressures. This would bring the policy rate to 6.5%.

The central bank raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation, but has since paused for three consecutive meetings.

T-bond yields declined due to the recent maturity of government securities worth more than PHP 140 billion, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The maturity added to the excess liquidity in the financial system, resulting in higher demand for investment alternatives with higher returns, he added.

The BTr wants to raise PHP 180 billion from the domestic market this month, or PHP 60 billion via Treasury bills and PHP 120 billion via T-bonds.

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