THE GOVERNMENT made a full award of the reissued 10-year Treasury bonds (T-bonds) it offered on Tuesday at a lower average rate amid good demand for higher-yielding longer tenors, with the Bangko Sentral ng Pilipinas (BSP) still expected to continue its easing cycle despite last week’s surprise pause.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued bonds it auctioned off on Tuesday as total bids reached P60.212 billion or more than twice the amount on offer.
This brought the total outstanding volume for the bond series to P336.9 billion, the Treasury said in a statement.
The reissued 10-year bonds, which have a remaining life of eight years and 11 months, were awarded at an average rate of 6.118%. Accepted bid yields ranged from 6.05% to 6.145%.
The average rate of the reissued papers declined by 13.3 basis points (bps) from the 6.251% fetched for the series’ last award on Jan. 21 and was 13.2 bps lower than the 6.25% coupon for the issue.
This was likewise 0.9 bp below the 6.127% quoted for the 10-year bond but 2.8 bps above the 6.09% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
The government fully awarded its bond offer as the average rate was lower than the yield fetched at the previous reissuance, the BTr said.
The BTr’s full award came as the offering fetched “decent” demand, which led to the bonds being awarded at yields close to last dealt levels, a trader said in a text message.
“Yields were within expected levels. Looks like there is still appetite for duration despite the BSP pause,” the trader added.
The reissued bonds fetched lower yields as the market continues to view the BSP’s monetary policy stance as dovish even as it opted to hold benchmark borrowing costs steady at its first meeting for the year, Rizal Commercial Banking Corp. Michael L. Ricafort said in a Viber message.
The Monetary Board last week unexpectedly held its key interest rates steady in a “prudent” move as global uncertainties cloud the outlook for growth and inflation.
At its first meeting for 2025, the BSP’s policy-setting body left the target reverse repurchase rate unchanged at 5.75%. Rates on the overnight deposit and lending facilities were also kept at 5.25% and 6.25%, respectively.
This was the central bank’s first pause following three consecutive 25-bp cuts since it began its easing cycle in August 2024.
The decision took the market by surprise as 19 out of 20 analysts polled by BusinessWorld had anticipated a fourth straight 25-bp cut at the meeting, while one analyst expected the BSP to keep rates steady.
BSP Governor Eli M. Remolona, Jr. said uncertainty over the trade policy of US President Donald J. Trump and its potential impact on the Philippines led to the decision to keep rates unchanged for now.
Mr. Trump’s plan to impose reciprocal tariffs on every country that charges duties on US imports has raised fears of a wider global trade war.
Since taking office in January, Mr. Trump has slapped tariffs on Chinese imports and a 25% tariff on steel and aluminum imports, while putting on hold duties on imports from Mexico and Canada.
Still, Mr. Remolona said the BSP continues to be in an easing cycle, with the pause letting the central bank hedge itself against the risk of policy reversal.
He added that the central bank will likely continue reducing interest rates by 25 bps at a time, with 50 bps in cut for this year still likely.
The Monetary Board’s next policy meeting is on April 3.
Analysts likewise expect the BSP to stay in monetary easing mode as weak economic growth, manageable inflation, and likely limited impact from Mr. Trump’s tariff policies giving the central bank ample space to cut rates further.
Mr. Ricafort added the 10-year bond fetched lower rates amid the recent decline in comparable US yields.
On Tuesday, Treasuries rallied on the soft sales numbers as markets swung back toward pricing in two Federal Reserve rate cuts this year rather than just one, Reuters reported.
Yields on 10-year Treasuries were holding at 4.478%, well off a top of 4.660% hit in the middle of last week.
The BTr is looking to raise P203 billion from the domestic market this month, or P88 billion from Treasury bills and P115 billion from T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy with Reuters