The government successfully sold its planned amount of long-term debt securities on Tuesday’s auction of Treasury bonds (T-bonds), driven by investors seeking to lock in higher rates ahead of a widely anticipated policy rate cut next month.
Auction results showed that the Bureau of the Treasury made a full award of P30 billion in reissued T-bonds, which have a remaining life of three years and one month.
The total bids amounted to P62.6 billion, exceeding the size of the original offering by 2.1 times.
READ: T-bills rates rise ahead of August MB meet
The debt paper fetched an average rate of 6.009 percent, lower than the 6.071 percent rate of the comparable three-year debt note issued on May 28. However, it was more expensive than the 5.982 percent quoted for the same tenor in the secondary market.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the higher yield to investors looking to secure high returns on debt securities, anticipating a widely expected 25-basis point (bps) cut in the local central bank policy rate.
The Monetary Board has indicated a possible rate cut of 25 bps as early as August, with another 25 bps reduction eyed before the end of the year, possibly preceding any similar move by the US Federal Reserve.
To combat inflation, the Bangko Sentral ng Pilipinas has raised its benchmark rate to 6.5 percent, with a cumulative increase of 450 bps—or 4.5 percentage points—from May 2022 to October 2023.
The Monetary Board will conduct its policy review on Aug. 15, the only policy meeting scheduled this quarter.
The government borrows from both local and foreign sources to fund its budget deficit, which is capped at P1.48 trillion or 5.6 percent of the economic output this year. INQ