MANILA, Philippines — Yields of government IOUs that will be on sale this week may go down as investors continue to process the impact of the Federal Reserve’s decision to maintain the key policy rates in the United States.
The Bureau of the Treasury (BTr) is set to offer this week P30 billion in reissued 20-year T-bonds (which have a remaining life of 14 years and seven months) and P15 billion worth of 91-, 182-, and 364-day T-bills.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said debt paper rates, especially in the secondary market where the government securities are traded after auction, have been keeping track of developments in the US economy recently.
“There is an increased possibility of Fed rate cuts recently, interestingly and ironically, as the latest Fed Fund Futures priced in two Fed rate cuts for [this year]. As a result, US Treasury yields continued to decline recently, with the benchmark 10-year US Treasury yield’s new 2.5-month lows lately at 4.23 percent,” he said in a Viber message.
Fed actions influence bond yields. Short-term bond yields usually drop if the Fed decides on a rate cut, which lowers borrowing costs for banks.
READ: BSP unlikely to cut rates ahead of US Fed, says Nomura
“The Bangko Sentral ng Pilipinas would likely match any Fed rate cut/s later in 2024 and in 2025 to maintain healthy interest rate differentials,” Ricafort added.
Last week, the government was able to raise P15 billion from the T-bills it offered. The BTr partially awarded the T-bonds it offered, securing just P26.23 billion of the P30-billion reissued 10-year bonds on offer.