BTr partially awards T-bonds as Mideast war pushes up yields

THE GOVERNMENT made a partial award of the dual-tranche Treasury bonds (T-bonds) it offered on Tuesday, even rejecting all bids for the shorter tenor, as global markets remained volatile due to the worsening war in the Middle East.

The Bureau of the Treasury (BTr) raised just P5.565 billion via its dual-tenor T-bond offer, below its goal to raise up to P40 billion through the auction, with total bids for both tenors reaching only P27.118 billion.

Broken down, the Treasury rejected all bids for the reissued seven-year bonds it placed on the auction block despite total bids reaching P13.358 billion, within the P10-billion to P20-billion target.

Had the government made a full award, the papers, which have a remaining life of three years and one month, would have fetched an average rate of 6.819%, with bids ranging from 6.65% to 6.895%.

This would have been 86.5 basis points (bps) higher than the 5.954% fetched for the series’ last award on Nov. 28 2024 and also 31.9 bps above the 6.5% coupon for the issue.

The average yield would also be up by 20.7 bps from the 6.612% fetched for the same bond series and 37.3 bps higher than the 6.446% quoted for the three-year bond, the benchmark tenor closest to the remaining life of the issue, at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.

Meanwhile, for the reissued 25-year T-bonds, the government borrowed just P5.565 billion via the tenor, below the P10 billion to P20 billion goal, even as tenders reached P13.76 billion.

The notes, which have a remaining life of 23 years and 10 months, were awarded at an average rate of 7.4%, with the BTr only accepting bids carrying this yield.

The average rate of the issue jumped by 70 bps from the 6.577% fetched for the series’ last award on Feb. 24 and was also 102.5 bps above its 6.375% coupon.

This was likewise 13 bps higher than the 7.27% fetched for the same bond series and 15.3 bps above the 7.247% quoted for the 25-year bond at the secondary market before Tuesday’s auction, PHP BVAL Reference Rates data showed.

“The back-and-forth headlines on the Middle East conflict continue to dampen investor appetite. As a result, there is a lack of liquidity in the market. Oil prices continue to drive upward movement in yields,” a trader said in a text message.

Expectations of second-round inflationary pressures due to the war also led to weaker demand for the T-bonds, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

US President Donald J. Trump’s postponement of the bombing of Iran’s power grid proved no panacea for investors worried about the ramifications of the Middle East war, Reuters reported.

US Treasury yields pushed higher and the dollar regained lost ground, in a retracement of the relief rally that swept markets overnight after Mr. Trump added five days to his Saturday ultimatum for Iran to reopen the Strait of Hormuz within 48 hours, citing “productive” talks Tehran. 

US Treasury yields rose on Tuesday after a sharp fall overnight, as little clarity over an end to the conflict left traders pricing in a more hawkish global interest rate outlook.

The two-year yield jumped 7 basis points to 3.9015% in Asia, while the benchmark 10-year yield was up more than 4 bps to 4.3797%.

The inflationary pulse from energy has seen investors abandon hope for further monetary easing globally and swing to pricing in rate hikes across most developed nations.

Tuesday’s T-bond auction was the last offering of government securities for this month. The government raised P142.358 billion from the domestic market in March, below the P248-billion plan, as the escalating Middle East war spooked investors, causing weaker demand and pushing bond yields higher.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy with Reuters