T-bond rates ease after dovish BSP, Fed signals

INQUIRER FILE PHOTO

The government raised a total of at least P60 billion from long-term debt during Tuesday’s sale of Treasury bonds (T-bonds) as investors rallied to the debt paper amid dovish signals from the US Federal Reserve and local monetary authorities.

Auction results on Tuesday showed the Bureau of the Treasury (BTr) borrowed the full issuance of P30 billion via re-issued 10-year T-bonds as total bids reached P95.61 billion, or 3.2 times larger than the original issuance last Jan. 25.

The BTr also offered an additional P30 billion through a tap facility – an electronic system that improves the issuance of government debt instruments– higher compared to the P20 billion it initially announced.

READ: Robust demand pulls down T-bond rates

“The strong demand from our Government Securities Eligible Dealers (GSEDs) allows us to raise additional funds through tap,” National Treasurer Sharon Almanza said in a message.

With a remaining life of nine years and five months, the bonds fetched an average rate of 6.212 percent.

This was 5.6 basis points lower than the 6.268 percent quoted for the comparable 10-year corporate debt note in the secondary market, based on Peso Bloomberg Valuation Service reference rates.

This was also 0.8 bps lower than the 6.22 percent prevailing for the comparable government security.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. said the bid was higher as local and foreign investors hoped to lock in while yields remained high before American and local policy rate cuts that markets expect to happen later this year.

READ: US Fed official suggests apt to cut rates sooner if layoffs rise

The Monetary Board hinted that it may cut rates by 25 basis points as early as August and another 25 bps before the end of the year — possibly even ahead of any dovish move by the US Federal Reserve.

To help bring down inflation, the Bangko Sentral ng Pilipinas has raised its benchmark rate, which stands at 6.5 percent, by a cumulative 450 bps — or 4.5 percentage points — from May 2022 to October 2023.

Meanwhile, the softer-than-expected US inflation in June strengthened market expectations of a Fed policy rate cut as early as September.

Fed chair Jerome Powell said that recent data has boosted confidence that inflation is heading toward the Fed’s 2 percent goal, possibly paving the way for a near-term rate cut.