THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as the papers attracted strong demand amid better risk sentiment and after Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. signaled a possible rate cut next month.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached P81.761 billion or almost thrice as much as the amount on offer.
The bonds, which have a remaining life of seven years and six months, were awarded at an average rate of 6.143%. Accepted bid yields ranged from 6.12% to 6.15%.
“With its decision, the Committee initially raised the full program of P30 billion while accepting further subscription through the tap facility. The total outstanding volume for the series is currently at P358.6 billion,” the Treasury said in a statement.
The average rate of the reissued papers was 17.5 basis points (bps) higher than the 5.968% fetched for the series’ last award on Feb. 11, but 60.7 bps lower than the 6.75% coupon for the issue.
This was also 4.7 bps above the 6.096% quoted for the seven-year bond — the benchmark tenor closest to the remaining life of the papers on offer — but 3 bps lower than the 6.173% 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.
“Strong demand was seen following the drop in US Treasury yields overnight. This morning, BSP Governor Remolona also said a cut is on the table for the April 10 Monetary Board meeting, adding to improvement in risk sentiment,” a trader said in a text message.
Stocks slumped globally on Monday, while US bond yields dropped as investor worries about the potential economic slowdown were exacerbated after President Donald J. Trump did not rule out a recession resulting from his tariffs, Reuters reported.
MSCI’s global stock index fell more than 2% for its biggest one-day drop since August while Nasdaq led Wall Street losses, ending down 4% for its steepest percentage loss since Sept 2022.
Investors had started seeking safety as early as Sunday when Mr. Trump in a Fox News interview talked about a “period of transition” while declining to predict whether his tariffs on China, Canada and Mexico would result in a US recession.
MSCI’s gauge of stocks across the globe fell 19.37 points or 2.27% to 832.73 after touching its lowest level since Jan. 13.
In fixed income, yields fell with US government bonds in demand after the Trump interview cut into investor confidence.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 10.4 bps to 3.898% from 4.002% late on Friday, on track for their largest daily drop since September.
The yield on benchmark US 10-year notes fell 9.3 bps to 4.225%, while the 30-year bond yield fell 6.9 bps to 4.548%.
Meanwhile, Mr. Remolona on Tuesday said a rate cut is “on the table” at the Monetary Board’s policy meeting next month, which has been rescheduled to April 10 from April 3 previously.
He added that the BSP is still on easing mode and expects to slash benchmark borrowing costs by “a few more times” this year.
In a move that surprised the market, the Monetary Board in February paused its nascent rate-cut cycle, which Mr. Remolona said was a “prudent” move amid uncertainty over the trade policies of US President Donald J. Trump and their potential impact on the Philippines.
He earlier said that the central bank will likely continue reducing interest rates by 25 bps at a time, with 50 bps in cuts still on the table this year.
The BSP last year cut benchmark rates by a total of 75 bps via three consecutive 25-bp reductions since it began its easing cycle in August, bringing the policy rate to 5.75%.
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. Sywith Reuters
