THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday at a lower average yield on the back of strong investor demand and with the US Federal Reserve set to deliver its first rate cut for this year at this week’s policy meeting.
The Bureau of the Treasury (BTr) borrowed P25 billion as planned via the reissued 10-year bonds it auctioned off, with total bids reaching P77.174 billion or over thrice the amount on offer.
This brought the total outstanding volume for the bond series to P442.6 billion, the Treasury said in a statement.
It made a full award of the T-bond offering as the papers fetched an average rate that was lower than what was quoted at the previous auction and the current secondary market yield, it added.
The reissued bonds, which have a remaining life of nine years and seven months, were awarded at an average rate of 5.907%. Accepted yields were from 5.898% to 5.915%.
The average rate of the reissued papers was nine basis points (bps) lower than the 5.997% fetched for the series’ last award on Aug. 19 and 46.8 bps below the 6.375% coupon for the issue.
This was also 1.4 bps lower than the 5.921% fetched for the same bond series and 4.9 bps below the 5.956% quoted for the 10-year paper at the secondary market before Tuesday’s auction, based on the PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
“Demand remains strong, if marginally higher, compared to last week, despite the anticipated FOMC (Federal Open Market Committee) meeting,” a trader said in a text message.
The reissued T-bonds fetched lower rates after some P288.659 billion worth of bonds matured last week, which boosted market liquidity and demand as players sought to reinvest their cash for higher yields, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Declining US bond yields amid heightened expectations of further monetary easing by the Fed this year due to weak economic data also drove domestic rates lower, he added.
The US central bank has kept its target rate at the 4.25%-4.5% range since December 2024.
Investors are betting that the Fed would resume its easing cycle this week and potentially leave the door open to further rate cuts, Reuters reported.
Markets see a rate reduction of at least 25 bps on Wednesday as a certainty, with a small chance of a supersized 50-bp cut. A total of 67 bps of reductions are seen over the rest of this year, rising to 81 bps by end-January.
Alongside the rate decision on Wednesday, investors will also focus on policymakers’ updated summary of economic projections and commentary from Fed Chair Jerome H. Powell.
The unprecedented pressure confronting the US central bank’s independence will also be in focus during Mr. Powell’s press conference.
US President Donald J. Trump, in a social media post on Monday, called on Mr. Powell to enact a “bigger” cut to benchmark interest rates in a social media post, pointing to the housing market.
Rapidly softening labor market data has been the key driver of the ramp-up in easing bets in recent weeks, resulting in a lower dollar and bond yields while pushing up equity prices, with Wall Street setting new records on Monday.
The BTr is looking to raise P220 billion from the domestic market this month, or P100 billion via Treasury bills and P120 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.56 trillion or 5.5% of gross domestic product this year. — Aaron Michael C. Sy with Reuters
