government completely Players moved to lock in still higher yields as treasury bonds (T-bonds) were offered on Tuesday amid expectations of a rate cut by the Bangko Sentral ng Pilipinas (BSP) next week.
The Bureau of the Treasury (BTR) borrowed P30 billion through reissued 10-year bonds as planned, with total bids for the term reaching P80.29 billion or more than double the amount on offer.
“The auction attracted strong demand…underscoring investors' continued appetite for government securities amid stable market conditions,” the Treasury said in a statement.
It said the full award brought the total outstanding amount of the series to P170 billion.
The reissued bonds, which have a remaining maturity of seven years and six months, were offered at an average rate of 5.859%. Accepted yields ranged from 5.8% to 5.875%.
The average rate of the reissued papers fell 36.5 basis points (bps) from the 6.224% achieved for the last award of the series on December 5, 2023 and also 76.6 bps below the 6.625% coupon for the issue.
That was 3 bps lower than the 5.889% fetched for the same bond series, but 5.5 bps higher than the 5.804% quoted for the seven-year paper – the benchmark tenor closest to the remaining life of the issue – in the secondary market ahead of Tuesday's auction, based on PHP Bloomberg Valuation Service. Reference rate data provided by BTR.
Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort said in a Viber message that the Treasury fully provided for the reissued bonds because the yields achieved were mostly in line with secondary market rates.
Demand was also higher than that seen for BTR's latest offering of seven-year notes last month, reflecting strong market appetite as investors likely wanted to secure yields at their current levels ahead of a potential rate cut at the Monetary Board's February 19 meeting amid benign inflation and weak economic growth, he said.
BSP Governor Eli M. Remolona, Jr. had earlier said a cut was possible at his policy meeting next week if he saw the need to support domestic demand.
Philippine GDP growth fell to a five-year low of 4.4% last year, missing the government's 5.5%-6.5% target due to a corruption scandal that hit both public and private spending.
However, as the central bank reaffirmed last week that it is nearing the end of its current easing cycle, further cuts will be limited and data-dependent, even if the inflation outlook remains benign.
The Monetary Board has cut benchmark rates by 200 bps from August 2024, taking the policy rate to 4.5%.
Analysts said the BSP may have room to ease its policy stance further to help stimulate economic activity as inflation remains low despite a rise in January.
Headline inflation rose to 2% in January from 1.8% in December, but slowed from 2.9% in the same month last year. This was the fastest in 11 months or since 2.1% in February 2025.
This was faster than the 1.8% average forecast businessworld The survey of 18 economists, but was within the BSP's 1.4%-2.2% estimate for the month.
Meanwhile, a trader said the outcome of the bond auction was in line with market expectations.
The trader noted that the offering saw lower demand than BTR's recent bond auctions as the issue is “illiquid, current and long-term in terms of tenure.”
The trader said the average yield received for the issuance was slightly higher than the prevailing secondary market rate for the seven-year period amid a rise in bond yields.
BTR wants to raise P308 billion from the domestic market this month, or P108 billion through treasury bills and P200 billion through T-bonds.
The government borrows from local and foreign sources to finance its budget deficit, which this year stands at P1.647 trillion, or 5.3% of GDP. — Aaron Michael C. Cy