THE GOVERNMENT made a full award of the Treasury bonds (T-bonds) it auctioned off on Tuesday at a lower average rate as the offer was met with strong demand amid expectations of another cut from the Bangko Sentral ng Pilipinas (BSP) as early as next week.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued seven-year bonds it auctioned off on Tuesday as total bids reached P98.633 billion or more than thrice the amount on offer.
This brought the total outstanding volume for the bond series to P184.7 billion, the Treasury said in a statement.
The bonds, which have a remaining life of five years and five months, were awarded at an average rate of 5.968%. Accepted bid yields ranged from 5.945% to 5.98%.
The average rate of the reissued papers declined by 9.2 basis points (bps) from the 6.06% fetched for the series’ last award on Jan. 7 and was also 40.7 bps lower than the 6.375% coupon for the issue.
This was likewise 2 bps below the 5.988% seen for the same bond series and the five-year bond at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
The oversubscription also prompted the Treasury to open its tap facility window to raise P10 billion more via the papers at the same average rate quoted during the auction proper, it said.
The demand seen for Tuesday’s T-bond offer was “surprisingly strong,” a trader said in a text message.
“Aside from the looming Monetary Board rate cut, sentiment also got a boost from developments overnight, specifically US President Donald J. Trump’s ‘truce’ with Canada and Mexico,” the trader said.
T-bond rates dropped amid “dovish” signals from BSP Governor Eli M. Remolona, Jr. and bets of another rate cut as early as next week after full-year 2024 Philippine gross domestic product (GDP) growth missed the government’s target, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.
Yields also declined on expectations that Philippine headline inflation was broadly steady last month, which would justify further policy easing by the BSP, he added.
Mr. Remolona last week said that a rate cut is “on the table” at the Monetary’s Board’s Feb. 13 policy meeting, with economic growth “a little bit below capacity.”
Philippine GDP grew by 5.6% in 2024, falling short of the government’s 6-6.5% target.
He added that the BSP may slash benchmark interest rates by a cumulative 50 bps this year in a gradual manner as “policy insurance” against risks.
Mr. Remolona said the reductions could be implemented in increments of 25 bps each in the first and second half of the year.
The Monetary Board has cut benchmark borrowing costs by 75 bps since kicking off its easing cycle in August last year, bringing the policy rate to 5.75%.
Meanwhile, a BusinessWorld poll of 16 analysts yielded a median estimate of 2.8% for the January consumer price index.
If realized, January inflation would have eased from 2.9% in December and matched the 2.8% print a year ago. This would also be within the BSP’s 2.5%-3.3% forecast for the month and the 2-4% target range.
The Philippine Statistics Authority is set to release January inflation data on Feb. 5 (Wednesday).
On the other hand, China on Tuesday slapped tariffs on some US imports in a swift response to new US duties on Chinese goods, renewing a trade war between the world’s top two economies even as Mr. Trump offered reprieves to Mexico and Canada, Reuters reported.
An additional 10% tariff across all Chinese imports into the US came into effect at 12:01 a.m. ET on Tuesday (0501 GMT) after Mr. Trump repeatedly warned Beijing it was not doing enough to halt the flow of illicit drugs into the United States.
Within minutes, China’s Finance Ministry said it would impose levies of 15% for US coal and LNG and 10% for crude oil, farm equipment and some autos.
China also said it was starting an anti-monopoly investigation in Alphabet, Inc.’s Google, while including both PVH Corp., the holding company for brands including Calvin Klein, and US biotechnology company Illumina on its “unreliable entities list”.
Separately, China’s Commerce Ministry and its Customs Administration said it is imposing export controls some rare earths and metals that are critical for hi-tech gadgets and the clean energy transition.
China’s new tariffs on the targeted US exports will start on Feb. 10, the ministry said, giving Washington and Beijing some time to try and reach a deal. Mr. Trump plans to speak to Chinese President Xi Jinping later in the week, a White House spokesperson said.
Mr. Trump on Monday suspended his threat of 25% tariffs on Mexico and Canada at the last minute, agreeing to a 30-day pause in return for concessions on border and crime enforcement with the two neighboring countries.
The BTr is looking to raise P203 billion from the domestic market this month, or P88 billion from Treasury bills and P115 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. — Aaron Michael C. Sy with Reuters
