Robust demand pulls down T-bond rates

INQUIRER FILE PHOTO

The government was able to fully raise its target amount of long-term debt during Tuesday’s sale of Treasury bonds (T-bonds) following the strong demand from market players which helped the government lock-in lower lending rates.

Auction results on Tuesday showed the Bureau of the Treasury (BTr) borrowed the full issuance of P30 billion via re-issued 20-year T-bonds as total bids reached P114.896 billion, or more than 3.8 times larger than the original issuance.

READ: T-bond rates ease; gov’t raises P30 billion

According to the BTr, the 20-year debt paper, which has a remaining life of seven years and eight days, fetched an average rate of 6.286 percent, a bit cheaper compared to the 6.378 percent quoted for the comparable seven-year debt note in the secondary market as of July 8, based on Peso Bloomberg Valuation Service Reference Rates data provided by the Treasury.

This, after the Monetary Board hinted at a possible rate cut as early as August, even ahead of the US Federal Reserve, said chief economist Michael Ricafort of the Rizal Commercial Banking Corp.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said in an economic briefing earlier this week that the Monetary Board is “somewhat more likely” to reduce policy rate by a total of 50 basis points (bps) this year and ahead of the Fed which is likely to cut in September.

Ricafort also attributed the lower yield rates in the auction as the government signaled an additional foreign bond sale for the rest of the year which will lessen the need for more local borrowings.

READ: Remolona: BSP will not wait too long to cut key rates

Earlier this week, Finance Secretary Ralph Recto said that the government is eyeing to issue yen and dollar bonds. The Marcos administration plans to borrow $5 billion from markets overseas this year, of which $2 billion was raised from the issuance of global bonds last May.

Moreover, the government wants to raise P260 billion from T-bills and P370 billion via Treasury bonds in the third quarter. The Treasury will auction off more T-bonds with shorter tenors in the second quarter. In July, the BTr is set to borrow a total of P115 billion via T-bonds.