Treasury fully awards reissued bonds at higher rate

The government made a full award of the Treasury bonds (T-bonds) it offered on Tuesday at a higher average rate amid increasing global yields due to uncertainties in developed markets.

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 58.947 billion or almost twice as much as the amount on offer.

This brought the total outstanding volume for the bond series to PHP 366.9 billion, the Treasury said in a statement.

The bonds, which have a remaining life of eight years and 10 months, were awarded at an average rate of 6.207%. Accepted bid yields ranged from 6.195% to 6.222%.

The average rate of the reissued papers was 8.9 basis points (bps) higher than the 6.118% fetched for the series’ last award on Feb. 18, but 4.3 bps lower than the 6.25% coupon for the issue.

This was also 3.78 bps below the 6.096% quoted for the 10-year bond but 1.45 bps above the 6.1925% 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 government made a full award of its offer as it saw “fairly decent” demand, a trader said in a text message.

“This was partly because of duration and anticipation of more debt supply at the belly to the long end of the curve moving forward as the BTr is expected to prefer to lengthen its maturity profile,” the trader said.

The BTr fully awarded the T-bonds it auctioned off as rates remained close to comparable secondary market levels, even as the average yield rose from the prior issuance amid the recent increase in global yields, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Euro zone bond yields rose sharply on Friday after Germany’s chancellor-in-waiting Friedrich Merz thrashed out a deal with the Green and Social Democrat parties to overhaul the country’s debt rules and massively boost state spending, Reuters reported.

Germany’s 10-year bond yield, the benchmark for the euro zone bloc, rose to 2.936%.

Mr. Merz reached an agreement with the Greens just days before a parliamentary vote on reforming the borrowing rules, a source close to the negotiations told Reuters. A debt deal compromise is now being examined by finance ministry officials, parliamentary sources said.

Yields soared earlier this month as investors learnt of the plans, which would mean much more borrowing via bond markets.

Germany’s 30-year bond yield on Friday surged to its highest since October 2023 at 3.253% and was within touching distance of its highest since 2011.

The spread between US 10-year Treasuries and German Bund yields ended at 142 bps.

US bond yields rose on Friday on concerns over the potentially inflationary impact of tariffs as trade wars between the US and its trading partners escalate.

Meanwhile, dovish signals from Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. helped cap the increase in T-bond yields, Mr. Ricafort added.

Mr. Remolona last week said the BSP remains on easing mode despite its unexpected decision to keep rates steady last month amid global uncertainties.

He added that a rate cut is “on the table” at the Monetary Board’s next rate-setting meeting on April 10.

The BTr is looking to raise P147 billion from the domestic market this month, or P22 billion from Treasury bills and P125 billion from T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy with Reuters