Government makes full award of reissued seven-year T-bonds

The government made a full award of the reissued Treasury bonds (T-bonds) on Tuesday at an average rate higher than secondary market levels amid hawkish comments from a Bangko Sentral ng Pilipinas (BSP) policy maker.

The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued seven-year bonds it offered on Tuesday as total bids reached P46.501 billion, well above the amount on the auction block.

This brought the total outstanding volume for the series to P124.7 billion, the BTr said in a statement after the auction.

The bonds, which have a remaining life of six years and nine months, were awarded at an average rate of 6.237%, with accepted yields ranging from 6.15% to 6.274%.

The average rate of the reissued bonds went down by 57 basis points (bps) from the 6.807% quoted for the papers when they were last offered on Nov. 7, 2023, but 11.2 bps above the 6.125% coupon for the issue.

This was also 3.9 bps higher than the 6.198% seen for both the same bond series and for the six-year tenor at the secondary market on Tuesday before the auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The awarded T-bond rates went higher as market participants digested the latest hawkish remark from Finance Secretary [Ralph G.] Recto of potentially two rate cuts from the BSP this year,” a trader said in an e-mail.

The BSP may cut rates by 50 bps this year, according to Mr. Recto, who is a member of the central bank’s policy-setting Monetary Board.

This will be less than the initial plan of four adjustments, the Finance chief said.

However, he does not expect the easing cycle to begin at the Monetary Board’s next meeting on April 8.

The central bank may also end up reducing borrowing costs by up to 200 bps over the span of two and a half years, he added.

The Monetary Board kept its policy rate steady at a near 17-year high of 6.5% at its February meeting.

The BSP had hiked borrowing costs by 450 bps from May 2022 to October 2023 to help tame elevated inflation.

Rising US Treasury yields also pushed T-bond rates up, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Tuesday’s T-bond auction was the last offering for the first quarter. The government was able to raise P512.3 billion out of its P525-billion borrowing plan for the period following partial awards in previous months.

In March alone, the BTr raised P180 as planned as it made full awards at all its Treasury bill (T-bill) and T-bond auctions amid strong demand and favorable rates.

For the second quarter, the Treasury is looking to borrow P585 billion from the domestic market, or P195 billion via T-bills and P390 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year. — A.M.C. Sy