Gov’t awards P15-B T-bonds on higher rate

The Bureau of the Treasury (BTr) made full award of its 20-year bonds worth P15 billion during its auction on Tuesday despite a higher rate amid economic uncertainties in the United States.

BTr registered total tenders for the debt instrument amounting to P27 billion, much lower than the P44.15 billion seen in the auction last week.

The bonds will mature on 23 May 2044. They fetched an average rate of 6.095 percent, rising from 5.861 percent recorded for the comparable bond tenor offered last 4 September 2024.

The new rate was also higher than the 6.06 percent recorded in the secondary market on Monday.

Rizal Commercial Banking Corporation chief economist Michael Ricafort said investors sought a higher return as they worry about higher global inflation rates under reelected US President Donald Trump.

Economic uncertainties under Trump

To mitigate losses, Ricafort said investors were trying to match anticipated high US Federal Reserve’s policy rates due to economic uncertainties under Trump administration.

Trump, who is seen by economists as a radical leader from the Republican Party, will be inaugurated into office on 20 January. He won against Democratic Party’s candidate and vice president Kamala Harris.

“A Trump US presidency could lead to fewer Federal rate cuts due to possible protectionist policies such as higher import tariffs and tighter immigration rules that could lead to higher inflation,” Ricafort said.

Trump promised to impose 10 to 20 percent tariffs on all imported goods and up to 60 percent on Chinese goods, which economists said businesses could pass to consumers.

“Possible rise in overall inflation could be offset by global crude oil prices among 11-month lows lately,” Ricafort said.

Security Bank chief economist Angelo Taningco added China’s economic troubles will likely keep the commodity’s prices stable.

Back to the fundamentals

“Back to the fundamentals of supply and demand, China’s demand for oil has been sluggish because the economy of China has been sluggish,” he said.

As the end of the year approaches, Ricafort said the BTr will be taking advantage of local interest rates to continue funding various government projects and narrowing its fiscal deficit.

“There will be no more national government’s global bond offering for the rest of 2024, with $500 million remaining out of the $5 billion programmed for this year. It would instead require more local borrowings as an alternative to finance the budget deficit,” he said.