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Gov’t makes full award of reissued 10-year bonds


THE GOVERNMENT made a full award of the reissued 10-year Treasury bonds (T-bonds) it auctioned off on Tuesday as its average rate dropped amid bets of monetary easing by the Bangko Sentral ng Pilipinas after inflation slowed in April.

The Bureau of the Treasury (BTr) raised P25 billion as planned from the reissued 10-year bonds it offered on Tuesday as total bids reached P66.719 billion, or more than twice the amount on the auction block.

The bonds, which have a remaining life of nine years and four months, were awarded at an average rate of 5.732%, with accepted yields ranging from 5.65% to 5.76%.

The average rate of the reissued bonds was 41 basis points (bps) lower than the 6.142% quoted when they were last offered on April 12 and 101.80 bps below the 6.75% coupon for the series.

This was likewise 11.30 bps lower than the 5.845% quoted for the nine-year bond and 7.50 bps below the 5.807% seen for the same bond series at the secondary market prior to Wednesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded the reissued 10-year Treasury Bonds (FXTN 10-69) at today’s auction. With 9 years and 4 months to maturity, the security fetched an average rate of 5.732%, lower than the previous auction rate of 6.142% when it was reissued last April as well as prevailing secondary market benchmark rates,” the BTr said in a statement after the auction.

“The bonds were 2.7 times oversubscribed, attracting P66.7 billion in total tenders compared to the P25-billion offering. With its decision, the committee was able to raise the full program of P25 billion, bringing the total outstanding volume for the series to P190 billion,” it added.

The bonds fetched lower rates following slower headline inflation in April, a trader said in a Viber message.

“Investors… think that the BSP will be able to cut rates sooner,” the trader said.

Inflation eased to 6.6% in April, the slowest in eight months or since the 6.3% print in August 2022, the Philippine Statistics Authority reported last week. This was also slower than the 7.6% in March.

For the first four months, inflation averaged at 7.9%, well above the central bank’s 2-4% target and 6% forecast for the year.

BSP Governor Felipe M. Medalla last month said the Monetary Board could consider holding rates steady at their May 18 meeting if inflation eased further in April.

However, Mr. Medalla has said it would be “dangerous” to cut benchmark rates faster than the US Federal Reserve’s easing as it might cause the peso to further depreciate against the dollar.

The central bank has raised benchmark interest rates by 425 bps since May 2022 to help bring down elevated inflation, with its policy rate now at a 16-year high of 6.25%.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message that the average yield on the bonds eased on market expectations of a pause in the Fed’s rate hike cycle.

The US central bank last week raised the fed funds rate by 25 bps to a range between 5% and 5.25%.

Since March 2022, the Fed has hiked borrowing costs by a total of 500 bps.

The BTr wants to raise P175 billion from the domestic market this month, or P75 billion via Treasury bills and P100 billion via T-bonds. — A.M.C. Sy

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