Weak peso pushes up T-bond rates

Bureau of the Treasury (From the Facebook account of the bureau)

MANILA, Philippines — The government failed to fully raise its target amount of long-dated local debts during Tuesday’s sale of Treasury bonds (T-bonds) as the peso sank to fresh 18-month lows prompting lenders to seek higher rates.

Auction results showed the Bureau of the Treasury (BTr) only borrowed P22.7 billion out of P30 billion it had planned to raise via 20-year T-bonds.

The offering was met with modest demand. The BTr said total bids amounted to P37.9 billion, 1.3 times bigger than the original size of the offering.

READ: Peso slides to 58 to $1

The not-so-strong demand for the issuance and a local currency that sank to the 58-per-dollar level for the first time in nearly two years prompted creditors to ask for higher rates, said Michael Ricafort, chief economist at Rizal Commercial Banking Corp.

The BTr said the new 20-year debt paper fetched an average rate of 6.797 percent, cheaper than the 7.017 percent seen during the last auction of comparable securities on April 23.

But it was more expensive than the 6.672 percent yield quoted for the same tenor in the secondary market as of May 21, 2024.

“The US dollar-peso exchange rate posted new 18-month highs lately at 58 levels that could lead to higher importation prices and could lead to some pick up in inflation,” Ricafort said.

The Marcos administration plans to borrow P585 billion from local creditors in the second quarter of 2024.