Gov’t fully awards T-bond offer

The government fully awarded the reissued Treasury bonds (T-bonds) it offered on Tuesday at a higher average yield as the market expects the Bangko Sentral ng Pilipinas (BSP) to hike borrowing costs next month.

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 40.828 billion, higher than the offered volume.

The bonds, which have a remaining life of five years and three months, were awarded at an average rate of 6.512%, with accepted yields ranging from 6.35% to 6.625%.

The average rate of the reissued bonds was 29.2 basis points (bps) higher than the 6.22% quoted for the papers when they were last offered on Aug. 30. However, this was 35.3 bps below the 6.875% coupon for the series.

The average yield was also 6.3 bps above the 6.459% quoted for the five-year bond and 11.7 bps higher than 6.405% seen for 10-year bonds maturing on Jan. 10, 2029 traded 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 five years and three months, the reissued bonds (FXTN 10-64) fetched an average rate of 6.512%,” the BTr said in a statement on Tuesday.

“The auction was 1.4 times oversubscribed with total tenders reaching PHP 40.8 billion. With its decision, the committee raised the full program of PHP 30 billion, bringing the total outstanding volume for the series to PHP 355 billion,” it added.

T-bond yields were at the higher end of market expectations as investors expect the BSP to hike benchmark interest rates, a trader said in a phone interview.

Higher September headline inflation has heightened bets of further tightening from the BSP’s policy-setting Monetary Board at their Nov. 16 review.

The BSP has kept its policy rate at 6.25% for four straight meetings after it hiked borrowing costs by 425 basis points from May last year to March this year to tame inflation.

Headline inflation quickened to 6.1% in September from 5.3% in August, data released last week showed.

For the first nine months, the consumer price index averaged 6.6%, well above the BSP’s 5.8% forecast and 2-4% target for the year.

Following the data release, the BSP said it “stands ready to resume monetary policy tightening as necessary to prevent the renewed broadening of price pressures.”

“The higher awarded T-bill rates today reflected renewed inflationary concerns from the recent spike in global crude prices following the outbreak of the Israeli-Palestinian conflict,” a second trader said in an e-mail on Tuesday.

The conflict in the Middle East has led to a flight to safe-haven instruments like US Treasuries, causing their yields to rise, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BTr wants to raise PHP 150 billion from the domestic market this month, or PHP 60 billion via Treasury bills and PHP 90 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. — AMCS