The government was able to fully borrow its planned amount of long-dated debt securities on Tuesday’s sale of Treasury bonds (T-bonds) ahead of a widely expected policy rate cut next month, which drove investors to lock in higher rates of debt securities.
Auction results showed that the Bureau of the Treasury made a full award of P25 billion in reissued T-bonds, which have a remaining life of 19 years and 10 months.
READ: T-bond rates ease after dovish BSP, Fed signals
The total bids amounted to P45 billion, exceeding the size of the original offering by 1.8 times.
The debt paper fetched an average rate of 6.430 percent, more expensive than the 6.391 percent quoted for the same tenor in the secondary market as of July 22.
High yields
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., attributed the higher yield to investors seeking to lock in high yields on debt securities as a possible cut of the local policy rate by 25 basis points draws closer.
The Monetary Board hinted that it may cut rates by 25 bps 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.
The Monetary Board is set to hold its policy review on Aug. 15.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6 percent of the economic output this year. INQ