Gov’t makes full award of new 20-year T-bonds

The government fully awarded the fresh 20-year Treasury bonds (T-bonds) it offered on Tuesday on strong demand for the papers and amid expectations of easing inflation that could support a rate cut by the central bank.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned from the new 20-year bonds it auctioned off on Tuesday as total bids reached PHP 91.423 billion, or more than thrice the amount on offer.

The bonds were awarded at a coupon rate of 6.25%. Accepted yields ranged from 6% to 6.328% for an average rate of 6.209%.

The coupon fetched for the tenor was 15.5 basis points (bps) lower than the 6.405% quoted for the 20-year bonds at the secondary market prior to the auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

The government made a full award of the new 20-year papers amid strong demand due to low supply of the tenor, a trader said by phone.

The BTr last auctioned off 20-year T-bonds in Nov. 22, 2023, with the reissued papers having a remaining life of 15 years and two months. The government made a full PHP 20-billion award of the bonds at that auction at an average rate of 6.593%, 15.7 bps below the 6.75% coupon for the series.

Meanwhile, the coupon rate fetched for the T-bonds on Tuesday was lower than the secondary market level as the easing inflation trend could push the Bangko Sentral ng Pilipinas (BSP) to cut rates this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Headline inflation eased to 2.8% in January from 3.9% in December and 8.7% in the same month a year prior.

This was the slowest inflation print in more than three years or since the 2.3% seen in October 2020, during the coronavirus pandemic.

This was also the second straight month that inflation was within the BSP’s 2-4% target.

The government will report February inflation data next week. The BSP earlier said they expect the consumer price index to continue slowing this quarter due to a high base, but warned it could pick up again by the second quarter amid easing base effects and lingering upside risks to prices.

The Monetary Board raised benchmark interest rates by 450 bps from May 2022 to October 2023 to help bring down elevated inflation, bringing the policy rate to a near 17-year high of 6.5%. It has since kept borrowing costs steady.

BSP Governor Eli M. Remolona, Jr. earlier said they are unlikely to cut rates in the first semester and remain ready to hike if needed, but could consider easing their stance by the second half if inflation is firmly within their target.

Tuesday’s T-bond auction was the last for the month. The BTr raised just PHP 60 billion via T-bonds out of the PHP 90-billion program for February as it rejected all bids at one auction of PHP 30 billion in bonds.

The BTr originally planned to raise PHP 150 billion through the T-bonds but canceled two auctions to make way for its retail Treasury bond offering.

Following Tuesday’s auction, the Treasury raised a total of PHP 121.3 billion out of its PHP 150-billion domestic borrowing program for February.

For March, the BTr is looking to raise a total of PHP 180 billion from the domestic market, or PHP 60 billion from 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 5.1% of gross domestic product this year. — AMCS