Treasury fully awards reissued 20-year bonds

The government made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday at an average rate below secondary market levels as central banks here and abroad kept borrowing costs steady.

The Bureau of the Treasury (BTr) raised PHP 20 billion as planned via the reissued 20-year bonds it offered on Tuesday as total bids reached PHP 71.303 billion or more than twice the volume on the auction block.

The bonds, which have a remaining life of 15 years and two months, were awarded at an average rate of 6.593%, with accepted yields ranging from 6.483% to 6.65%.

The average rate of the reissued bonds surged by 125.2 basis points (bps) from the 5.341% quoted for the papers when they were last awarded on Nov. 26, 2019.

Still, this was 15.7 bps below the 6.75% coupon for the series.

The average yield was likewise 18.4 bps lower than the 6.777% quoted for the 15-year bond and 19.9 bps below the 6.792% 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 Treasury.

The bond’s average rates was lower than secondary market levels as the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve continue to keep their benchmark rates unchanged, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Demand for the reissued notes was “unusually” high compared with bond auctions in recent months, he noted.

The BSP last week left benchmark interest rates unchanged after inflation eased in October, but reiterated that they could resume tightening if needed.

The Monetary Board on Thursday kept its policy rate steady at 6.5%, as expected by 15 of 18 analysts in a BusinessWorld poll. Interest rates on the central bank’s overnight deposit and lending facilities were also maintained at 6% and 7%, respectively.

This was the central bank’s first policy meeting after it hiked rates by 25 bps in an off-cycle move on Oct. 26.

The BSP has raised benchmark rates by a total of 450 bps since May 2022.

The policy-setting Monetary Board 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 meeting during its Oct. 31-Nov. 1 review.

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

The US central bank will meet on Dec. 12-13 to review policy anew.

Still, the bonds fetched an average rate higher than what was quoted for the previous award as investors awaited the release of minutes of the Fed’s latest meeting.

The BTr plans to borrow PHP 225 billion from the domestic market this month, or PHP 75 billion via T-bills and PHP 150 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. — A.M.C. Sy