T-bonds fully awarded despite higher yields

By Aaron Michael C. Sy, Reporter

THE GOVERNMENT fully awarded its reissued Treasury bonds on Tuesday, even as yields rose amid cautious investor sentiment ahead of a widely expected policy rate hike by the Bangko Sentral ng Pilipinas (BSP) this week.

The Bureau of the Treasury (BTr) raised the planned P20 billion through reissued 10-year bonds, with total bids reaching P26.453 billion, reflecting adequate but measured demand from the market.

The bonds, which carry a remaining maturity of seven years and three months, were awarded at an average yield of 6.643%.

This was higher than 6.473% in the last auction of the same series on March 10 and also above the 6.625% coupon rate of the issuance.

Accepted yields ranged from 6.58% to 6.693%, underscoring investor preference for higher returns in light of expectations of tighter monetary conditions and global risks.

A trader said demand for longer-dated government securities remained subdued as investors priced in the likelihood of a BSP rate increase this week, while also factoring in uncertainty linked to the US-Israel war on Iran.

A BusinessWorld poll showed that 11 of 19 analysts expect the Monetary Board to raise the target reverse repurchase rate by 25 basis points, which would bring the policy rate to 4.5%. This could be the BSP’s first tightening move since October 2023.

BSP Governor Eli M. Remolona, Jr. earlier said the central bank still has room to raise rates to manage inflation risks, noting that global oil price movements could spill over into domestic food and transport costs.

He also warned that second-round effects might emerge if price pressures broaden further across the economy.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said investors have remained cautious on longer-tenor instruments due to lingering geopolitical risks and expectations of higher interest rates in the near term.

Despite the softer demand, the government completed the full award of the issuance, reflecting continued market participation even in a volatile environment.

The reissued series now has an outstanding volume of P199.5 billion, according to the Treasury.

For April, the government is looking to borrow as much as P248 billion from the domestic market, consisting of P140 billion in Treasury bills and P108 billion in Treasury bonds.

These fund-raising activities form part of efforts to finance the national budget deficit, which is capped at P1.61 trillion or 5.3% of gross domestic product for the year.