Government fully awards reissued Treasury bonds

The Philippine government fully awarded reissued Treasury bonds at an auction on Tuesday, with rates in line with secondary market levels, but higher than its last award on expectations that the Bangko Sentral ng Pilipinas (BSP) would keep interest rates steady this month.

The Bureau of the Treasury (BTr) raised P30 billion as planned via reissued 10-year bonds, as total bids reached P71.24 billion, or more than twice the offer.

The bonds, which have a remaining life of nine years and eight months, were awarded at an average rate of 6.825%. Accepted yields were 6.75% to 6.85%.

The average rate of the reissued bonds rose by 38.6 basis points (bps) from 6.439% on April 8, when the debt was last offered. It was also 57.5 bps above the 6.25% coupon for the series.

The rate was 8.1 bps lower than 6.906% quoted for the 10-year bond but a basis point above 6.815% 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 higher T-bond rates reflected lingering expectations that the BSP will maintain policy rates for the upcoming monetary meeting this month,” a trader said in an e-mail.

BSP Governor Eli M. Remolona, Jr. told reporters on Monday the central bank has the leeway to keep the key rate steady at its meeting this month even if inflation quickened in April.

“That’s already factored in,” he said in mixed English and Filipino. “We know it will be a bit high because of base effects. If it’s too high, that will postpone our easing.”

The Monetary Board will review policy on May 16.

The BSP kept its policy rate at a 17-year high of 6.5% for a fourth straight meeting in April after raising borrowing costs by 450 bps from May 2022 to October 2023.

Inflation picked up for a third straight month to 3.8% in April from 3.7% in March. Inflation was 6.6% a year ago.

April inflation was within the BSP’s 3.5-4.3% forecast for the month and below the 4.1% median estimate of 16 analysts in a BusinessWorld poll last week.

The average rate awarded was in line with the declining secondary market yields due to lower global crude prices recently, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

Oil futures ended largely unchanged on Monday as a ceasefire agreement between Hamas and Israel continued to elude negotiators, Reuters reported.

Both crude oil benchmarks settled 0.5% or 37 cents higher, with Brent crude futures at USD 83.33 a barrel and US West Texas Intermediate crude futures (WTI) at USD 78.48 a barrel.

Last week, both contracts posted their steepest weekly loss in three months, with Brent falling more than 7% and WTI down by 6.8%, as investors weighed weak US job data and the possible timing of a US Federal Reserve interest rate cut.

The BTr wants to raise PHP 210 billion from the domestic market this month — PHP 60 billion from Treasury bills and PHP 150 billion via T-bonds. — By Aaron Michael C. Sy, Reporter