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Treasury makes full award of bonds at higher average rate


THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday at a higher average rate before the release of key economic data this week.

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 P60.889 billion or more than twice the offered volume.

The bonds, which have a remaining life of six years and eight months, were awarded at an average rate of 6.807%, with accepted yields ranging from 6.7% to 6.84%.

The average rate of the reissued bonds was 43.2 basis points (bps) higher than the 6.375% quoted for the papers when they were last offered on Oct. 17.

Meanwhile, this was 6.8 bps below the 6.875% coupon for the series.

The average yield was also 6.9 bps lower than the 6.876% quoted for the five-year bond and 3.2 bps below the 6.839% 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 Treasury.

T-bond yields rose from the rates seen for the previous award, following the increase in most Treasury bill (T-bill) yields amid “expectations of an upbeat Philippine GDP (gross domestic product) report this week,” a trader said in an e-mail.

On Monday, the average rates of the 91- and 182-day T-bills went up by 0.9 bp to 6.352% and 7.4 bps to 6.536%, respectively. Meanwhile, the yield on the 364-day T-bill inched down by 0.1 bp to 6.591%.

A BusinessWorld poll of 18 economists and analysts last week yielded a median estimate of 4.9% for GDP growth in the July-September period.

If realized, this would be faster than the preliminary 4.3% growth recorded in the preceding quarter, but slower than 7.7% in the July-September period a year ago.

This would bring the nine-month GDP growth average to 5.2%, still below the government’s 6-7% full-year target.

The Philippine Statistics Authority will release third-quarter GDP data on Thursday.

T-bond rates were lower than secondary market levels as seven-year US Treasury yields dropped amid lower global crude oil prices recently and expectations that the US Federal Reserve may be done with its tightening cycle, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Fed kept its benchmark interest rate steady at the 5.25%-5.5% range for a second straight time during its meeting from Oct. 31 to Nov. 1.

The US central bank has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

Market expectations that the Fed will hold interest rates steady at its December meeting stand at 90.4%, down from 95.2 on Friday but above the 74.4% a week ago. Expectations for a rate cut of at least 25 basis points have grown to more than 50% at the May 2024 meeting, according to CME’s FedWatch Tool, Reuters reported.

Markets will look for more clarity on the Fed’s intentions from officials speaking later in the week, including Fed Chair Jerome H. Powell, and voting members such as New York Fed chief John Williams and Dallas Fed President Lorie Logan.

The BTr plans to borrow P225 billion from the domestic market this month, or P75 billion via T-bills and P150 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy

Neil Banzuelo

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