P30B in T-bond awarded amid falling rates

The Bureau of the Treasury (BTr) awarded P30 billion worth of 10-year Treasury bonds in its auction on Tuesday as rates continued to fall in over eight months.

Total bids totaling P96.3 billion or 3.2 times bigger than its full program of P30 billion were registered by the BTr.

The T-bond’s average rate settled at 5.967 percent, down from 6.212 percent of the comparable bond auctioned on 16 July and from 6.06 percent seen in the secondary market.

The bond has a remaining term of nine years and four months.

Easing of BSP’s policy rate

The results came after the Bangko Sentral ng Pilipinas eased its policy rate by 25 basis points (bps) to 6.25 percent last month due to projected lower inflation rates until next year.

BSP Governor Eli Remolona Jr. said another 25 bps reduction is possible as he expects rice prices to remain stable due to lower tariff rate on imported rice at 15 percent from 35 percent.

However, he said some inflationary risks linger as tensions in the Middle East and the Russia-Ukraine war might disrupt the supply of some commodities.

Investors upbeat

Still, Rizal Commercial Banking Corporation chief economist Michael Ricafort said local and foreign investors are upbeat on minimal losses from inflation as analysts shared the US Federal Reserve might also start cutting its rate on Wednesday.

“The comparable benchmark 10-year US Treasury yield stood at new 15-month lows at 3.63 percent as global crude oil prices still lingered among 14-month lows that could support the recent easing inflation trend and also justify further Federal Reserve and BSP rate cuts,” he said.

As a result of Tuesday’s auction, the outstanding volume of T-bond series 10-72 reached P231.9 billion.

This year, the government aims to borrow a total of P2.57 trillion.

In July, the BTr said the country’s debt stock rose by P206.49 billion, leading to a cumulative loan of P15.69 trillion.

Strategic borrowing for infra funding

The Marcos administration said it strategically borrows to fund its massive infrastructure plan and reduce the poverty rate in the country from around 15 percent to a single digit.

Also on Tuesday, the BTr opened its tap facility for the 10-year T-bond with a coupon rate of 6.25 percent and a volume of P5 billion.

The tap facility enables the government to secure funds when market conditions are favorable.