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Gov’t fully awards T-bonds at lower rates as market awaits outcome of key meetings

BW FILE PHOTO

THE GOVERNMENT fully awarded the reissued seven-year Treasury bonds (T-bonds) it auctioned off on Tuesday at a lower average rate as the decisions of monetary authorities draw near.

The Bureau of the Treasury (BTr) raised P35 billion as planned from its offer of reissued seven-year securities that have a remaining life of six years and eight months on Tuesday. Total bids reached P54.844 billion.

Rates awarded on Tuesday ranged from 6.375% to 6.750%, bringing the average yield for the bonds on offer to 6.588%, lower by 15.2 basis points (bps) than the 6.740% coupon fetched for the series when it was last offered on June 14.

However, the average rate was 13.37 bps above the 6.4543% yield on the seven-year bonds quoted for the issue at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Reference Rates data provided by the BTr.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters that the full awarding was because “[the] rates are aligned with secondary levels.”

A trader said that the award was “quite aggressive,” similar to the coupon of the 10-year debt paper issued last week.

“The market is now demanding higher rates to get longer tenors ahead of the Federal Open Market Committee [meeting], and the risk of a global policy tightening chorus,” the trader added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the markets are anticipating a Fed rate hike ranging between 75 bps and 100 bps on Sept. 21 amid elevated inflation.

This is “to be followed by another hike in local policy rates on Sept. 22 to help stabilize the peso, as well as to better manage both inflation and inflation expectations,” he added in a Viber message.

The US consumer price index rose in August amid rising rent and healthcare costs, strengthening the case for another aggressive Fed rate hike.

Fed Chair Jerome H. Powell earlier said the central bank was “strongly committed” to fighting inflation. The Fed is meeting to review policy on Sept. 20-21 and has raised rates by 225 bps since March, including two 75-bp moves in June and July.

At home, the BSP will hold its policy meeting the following day, Sept. 22. It has hiked borrowing costs by 175 bps since May to rein in rising prices.

A BusinessWorld poll last week showed 14 out of 15 analysts expect the BSP to fire off another rate hike on Thursday. Eleven see a 50-bp increase, while two expect a moderate hike worth 25 bps. Meanwhile, one is betting on a big 75-bp move.

BSP Governor Felipe M. Medalla said last month the central bank has room to hike borrowing costs further as inflation remains elevated, with the Fed’s aggressive tightening also posing additional risk to prices due to its effect on the peso.

Headline inflation eased to 6.3% in August from a near four-year high of 6.4% in July. This brought the eight-month average to 4.9%, higher than the central bank’s 2-4% target but still below its 5.4% forecast for the year.

The peso closed at an all-time low P57.43 per dollar on Friday, losing 27 centavos from its P57.16 finish on Thursday, Bankers Association of the Philippines data showed. It has since slightly appreciated to P57.4 on Monday.

The BTr wants to raise P200 billion from the domestic market this month, or P60 billion through Treasury bills and P140 billion via T-bonds.

The government borrows from local and external sources to help fund a budget deficit capped at 7.6% of GDP this year. — Diego Gabriel C. Robles

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