Gov’t fully awards bonds

The government made a full award of the reissued Treasury bonds (T-bonds) it auctioned off on Wednesday with lower rates amid expectations that borrowing costs here and in the United States will remain steady for the rest of the year.

The Bureau of the Treasury (BTr) raised PHP 20 billion as planned via the reissued seven-year bonds it offered on Wednesday as total bids reached PHP 60.266 billion, or more than thrice the amount on the auction block.

The bonds, which have a remaining life of five years and 10 months, were awarded at an average rate of 6.099%, with accepted yields ranging from 6.045% to 6.120%.

The average rate of the reissued bonds dropped by 36.9 basis points (bps) from 6.468% quoted for the papers when they were last awarded on Aug. 8. This was also 90.1 bps below the 7% coupon for the series.

The average yield was likewise 12 bps lower than the 6.219% quoted for the six-year bond and 6.5 bps below the 6.164% seen for same bond series traded at the secondary market before Wednesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The lower awarded rates today reflected both easing inflationary concerns and waning prospects of a December policy rate hike from both the Federal Reserve and the Bangko Sentral ng Pilipinas (BSP),” a trader said in an e-mail on Wednesday.

The BSP on Nov. 16 kept its policy rate at a 16-year high of 6.5% after inflation eased in October. The pause came after the central bank raised rates by 25 bps in an off-cycle move on Oct. 26.

The Monetary Board has hiked borrowing costs by 450 bps since May 2022 to temper inflation.

It will hold its last meeting for the year on Dec. 14.

Meanwhile, the Fed kept its target rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March 2022.

The Federal Open Market Committee will next meet on Dec. 12-13 to review policy.

T-bond yields declined amid lower global crude oil prices recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Brent crude futures steadied at $81.63 a barrel ahead of a crucial meeting of the Organization of the Petroleum Exporting Countries and its allies on Thursday to decide output policy in the next months, Reuters reported.

Tuesday’s auction was the BTr’s last offering for November. Overall, the government raised PHP 150.97 billion out of its PHP 225-billion domestic borrowing program for the month.

The government borrows from local and external sources to help fund a budget deficit capped at 6.1% of the gross domestic product this year. — AMCS with Reuters