THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday at a lower average rate amid strong demand from the market and before the release of key US data that could affect the pace of the US Federal Reserve’s easing cycle.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued seven-year bonds it auctioned off on Tuesday as total bids reached P71.236 billion, or more than double the amount on offer.
This brought the total outstanding volume for the series to P154.7 billion, the Treasury said in a statement.
The bonds, which have a remaining life of five years and six months, were awarded at an average rate of 6.06%. Accepted yields ranged from 6.03% to 6.75%.
The average rate of the reissued papers decreased by 17.7 basis points (bps) from the 6.237% fetched for the series’ last award on March 26, 2024. This was also 31.5 bps lower than the 6.375% coupon for the issue.
This was likewise 9 bps below the 6.15% seen for the same bond series and 1.8 bps lower than the 6.078% quoted for the five-year bond at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
The Treasury fully awarded its T-bond offer as the average rate was lower than prevailing benchmark rates at the secondary market, it said.
“Tendered T-bonds rates fetched lower today in anticipation of a softer US nonfarm payrolls report on Friday,” a trader said in an e-mail on Tuesday. “However, the demand was somehow subdued as investors waited for clarity on US and Philippine economic releases this week.”
US labor market data has been volatile in recent months following aerospace industry strikes and hurricanes, Reuters reported. November data showed growth of 227,000 jobs that rebounded from a tepid rise in October.
The report for December, due out on Jan 10, is expected to show growth of 150,000 jobs with the unemployment rate at 4.2%, according to a Reuters poll of economists.
The data could help clarify the Federal Reserve’s interest rate plans after the central bank last month rattled markets by reducing its projected rate cuts for 2025.
The Fed at its December meeting lifted its forecast for expected inflation in 2025, paving the way for higher interest rates than it previously forecast.
After lowering its benchmark rate at three straight meetings, the Fed is expected to pause its easing cycle when it next meets at the end of January before making further cuts of about 50 basis points over the rest of the year.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the reissued bonds auctioned off on Tuesday fetched an average rate that was slightly higher than what was quoted for the BTr’s most recent offering of five-year papers on Nov. 26 due to the pickup in December headline inflation.
At the Nov. 26 auction, the Treasury made a full P15-billion award of reissued seven-year bonds that had a remaining life of four years and five months at an average rate of 5.954%.
Philippine headline inflation picked up to 2.9% in December from 2.5% in November due to higher utility and transport costs, the government reported on Tuesday.
This marked the third consecutive month of faster inflation and was higher than the 2.7% median estimate in a BusinessWorld poll of 13 analysts.
Still, this was slower than the 3.9% print in the same month a year prior and was within the 2.3%-3.1% forecast of the Bangko Sentral ng Pilipinas (BSP).
The December rate brought the full-year 2024 inflation average to 3.2%, slower than 6% in 2023 and marking the first time since 2021 that the consumer price index settled within the BSP’s 2-4% annual target. This also matched the central bank’s baseline forecast for the year.
The BTr plans to raise P213 billion from the domestic market this month, or P88 billion via T-bills and P125 billion through 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. — AMCS with Reuters
