THE GOVERNMENT made a full award of its dual-tranche offering of Treasury bonds (T-bonds) on Wednesday at lower yields before an expected rate cut by the Bangko Sentral ng Pilipinas (BSP).
The Bureau of the Treasury (BTr) raised P35 billion as planned via its dual-tenor T-bond offer as total bids reached P128.332 billion, or more than triple the amount placed on the auction block.
Broken down, the Treasury borrowed the programmed P15 billion via the reissued seven-year bonds, with total bids reaching P93 billion or more than four times the amount on offer.
The bonds, which have a remaining life of two years and seven months, were awarded at an average rate of 5.634%. Accepted yields ranged from 5.62% to 5.648%.
The average rate of the reissued papers went down by 18.3 basis points (bps) from the 5.817% fetched for the series’ last award on July 22, but was 200.9 bps above the 3.625% coupon for the issue.
This was also 7.4 bps below the 5.708% fetched for the same bond series and 9 bps lower than the 5.724% quoted for the three-year bond — the benchmark tenor closest to the remaining life of the issue — at the secondary market before Wednesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.
Meanwhile, the government also raised P25 billion as planned from the reissued 25-year T-bonds, with total bids for the tenor reaching P35.332 billion.
The notes, which have a remaining life of 24 years and five months, were awarded at an average rate of 6.374%. Accepted yields ranged from 6.3% to 6.41%.
The average rate went down by 27.5 bps from the 6.649% fetched for the series’ last award on June. 25 and was also 0.1 bp lower than the 6.375% coupon for the issue.
However, this was 6 bps above the 6.314% seen for the same bond series and 2.7 bps higher than the 6.347% quoted for the 25-year bond at the secondary market before Wednesday’s auction, PHP BVAL Reference Rates data showed.
Both T-bond tenors offered on Wednesday fetched lower rates amid expectations of a rate cut by the BSP on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Both bonds’ yields fell significantly compared to their previously traded averages, which is another instance of the market preparing for the BSP’s anticipated rate cut tomorrow,” a trader likewise said in a text message.
A BusinessWorld poll conducted last week showed all 20 analysts surveyed expect the Monetary Board to cut the target reverse repurchase rate by 25 bps to 5% on Thursday. If realized, this would be the third straight 25-bp reduction since April.
The BSP has slashed benchmark borrowing costs by a cumulative 125 bps since it kicked off its easing cycle in August 2024.
Mr. Ricafort said the T-bonds’ yields eased amid strong investor demand.
“[The reissued seven-year bond] was met with much higher demand compared to the [25-year bond], indicating a clear preference for shorter tenor instruments at the moment,” the trader added.
Expectations of a US Federal Reserve cut next month also helped drive bond yields lower, Mr. Ricafort added. — A.M.C. Sy
