The Bureau of the Treasury (BTr) made a full award of its P15-billion reissued 10-year Treasury bonds (T-bonds) in its auction on Tuesday as the average rate declined amid investors’ anticipation of another rate cut by the Bangko Sentral ng Pilipinas.
The BTr said the total bids for the debt instrument reached P40.9 billion or 2.7 times higher than the programmed offer.
The reissued bonds have a remaining term of six years and nine months.
They fetched an average rate of 5.690 percent, down from 6.128 percent the BTr recorded in its auction for the seven-year bond on 13 August.
Compared to the results in the secondary market, the new T-bond rate was also slightly lower than the average rate of 5.70 percent of the comparable bond tenor.
BSP’s policy rate cut
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the new auction results echoed the BSP’s likely reduction of its policy rate on Wednesday.
“The BSP rate-setting is widely expected to be reduced by at least 25 basis points after inflation eased to 1.9 percent in September, slightly below the BSP inflation target range of 2 to 4 percent,” he said.
In its policy meeting in August, the BSP projected manageable risks from inflation as it expected inflation to settle at 3.3 percent this year, 2.9 percent in 2025, and 3.3 percent in 2026 mainly due to cheaper rice.
The government in July started to implement a lower tariff on imported rice at 15 percent from 35 percent.
Ricafort added rates of Philippine government securities could match those of US Treasury yields amid analysts’ projections that the Federal Reserve might tighten its policy rate this year amid Americans’ strong employment and consumption rates.
“There are reduced odds of Federal Reserve rate cuts for the rest of 2024 as priced in by the Fed Fund Futures to 45-basis point reduction versus more than 75 basis points about three weeks ago,” he said.
However, Ricafort said investors and central banks will closely monitor tensions in the Middle East as they threaten to push up prices of oil and other goods.
“Global crude oil prices were among the one-month highs amid increased tensions in the Middle East since 1 October, when Iran made a second missile attack on Israel,” he said.