Treasury fully awards reissued 10-year bonds

The government made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as strong investor demand caused its average yield to decline.

The Bureau of the Treasury (BTr) raised PHP 25 billion as planned from its offering of reissued 10-year bonds as total bids reached PHP 63.546 billion or more than twice the amount placed on the auction block.

This brought the total outstanding volume for the series to PHP 392.6 billion, the Treasury said in a statement.

The BTr said it fully awarded its offering as the average yield fetched for the bonds on offer was lower than the rate quoted when they were last reissued in June.

The T-bonds, which have a remaining life of nine years and nine months, were awarded at an average rate of 6.285%. Accepted bid yields ranged from 6.264% to 6.295%.

The average rate for the reissued papers went down by 14.3 basis points (bps) from the 6.428% fetched for the series’ last award on June 17 and was also 9 bps below the 6.375% coupon for the issue.

However, this was 3.2 bps above the 6.253% quoted for the 10-year bond and 1.4 bps higher than the 6.271% 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 BTr.

The reissued bonds were fully awarded amid “the consistent demand for the security ever since it released, as well as BTr’s constant support for the security,” a trader said in a text message.

The papers auctioned off on Tuesday are part of the PHP 300 billion in new benchmark fixed-rate Treasury notes (FXTN) issued on April 28. These were offered under a new issuance format meant to establish a new benchmark bond and targeting institutional investors like corporates, cooperatives, trust funds, retirement funds, and provident funds.

“Furthermore, the bond auction volume is a bit smaller this week compared to previous auctions, making it easier to fill,” the trader said.

“As for the awarded rate, market expectations were simply fulfilled, as early yield indications often predicted the auction’s yield range to be around 6.25%-6.3% or 6.265%-6.3%.”

Rizal Commercial Banking Corp. Michael L. Ricafort said the T-bonds fetched a lower average rate compared to the previous reissuance amid a moderating inflation outlook that could support further rate cuts by the Bangko Sentral ng Pilipinas (BSP).

“Local monetary officials recently signaled possible 50-bp local policy rate cuts for the rest of the year and a possible cut in banks’ RRR (reserve requirement ratios) in 2026 amid the still-benign inflation environment despite the recent tensions between Israel and Iran amid global risk factors that could slow down global economic growth that could indirectly slow down local economic growth, thereby warranting monetary easing measures to boost economic growth as a policy priority,” Mr. Ricafort said in a Viber message.

He added that expectations of further cuts by the US Federal Reserve this year due to the potential economic impact of the Trump administration’s heightened trade war would also support the BSP’s easing cycle.

BSP Governor Eli M. Remolona, Jr. earlier said the central bank has room for two more rate cuts this year amid moderating inflation and weak economic growth.

The Monetary Board on June 19 delivered a second straight 25-bp reduction to bring the policy rate to 5.25%. It has now lowered benchmark interest rates by a cumulative 125 bps since it started its easing cycle in August last year.

Philippine headline picked up to 1.4% in June from 1.3% in May. Still, this was slower than the 3.7% clip in the same month last year. June also marked the fourth straight month that inflation settled below the BSP’s 2-4% annual target.

For the first six months, the consumer price index averaged 1.8%, slightly higher than the central bank’s baseline forecast of 1.6%.

Meanwhile, Fed Chair Jerome H. Powell has said he expects US inflation to increase this summer as a result of tariffs, which is seen keeping the US central bank on hold until later in the year, Reuters reported.

US President Donald J. Trump on Monday renewed his attacks on Mr. Powell, saying interest rates should be at 1% or lower, rather than the 4.25% to 4.5% range the Fed has kept the key rate at so far this year.

Fed funds futures traders have been pricing in about 50 bps of interest rate cuts by yearend, with the first quarter-point reduction seen as likely in September.

The BTr wants to raise PHP 250 billion from the domestic market this month, or PHP 125 billion through Treasury bills and P125 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.56 trillion or 5.5% of gross domestic product this year. — A.M.C. Sy with Reuters