BTr partially awards bond offer at mixed yields

THE GOVERNMENT made a partial award of the dual-tenor Treasury bonds it offered on Tuesday at mixed yields as lingering global uncertainties kept market players cautious, dampening demand for long-term debt.

The Bureau of the Treasury (BTr) raised a combined P41.599 billion via its dual-tranche T-bond sale, below the P50-billion plan, even as total bids reached P127.724 billion or more than double the amount placed on the auction block.

Broken down, the Treasury borrowed P30 billion as programmed via the reissued seven-year bonds, with total bids reaching P102.739 billion or more than triple the amount on offer.

This brought the total outstanding volume for the bond series to P325.6 billion, the BTr said in a statement.

To accommodate the strong demand attracted for the tenor, the BTr on Tuesday opened its tap facility window to raise P15 billion more through the reissued seven-year bonds.

The papers, which have a remaining life of two years and six months, were awarded at an average rate of 5.324%. Accepted yields ranged from 5.285% to 5.335%.

The average rate of the reissued papers was lower by 14.3 basis points (bps) from the 5.467% fetched for the series’ last award on Jan. 6, but was 157.4 bps above the 3.75% coupon for the issue.

This was also 5 bps below the 5.374% fetched for the same bond series and 12.8 bps lower than the 5.452% quoted for the three-year bond, the benchmark tenor closest to the remaining life of the papers on offer, at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.

Meanwhile, the government raised just P11.599 billion from the reissued 20-year T-bonds as total bids reached P24.985 billion, just above the P20-billion offer.

This brought the total outstanding volume for the bond series to P256.2 billion.

The papers, which have a remaining life of 18 years and three months, were awarded at an average rate of 6.572%, with tenders awarded carrying yields from 6.5% to 6.6%.

The 20-year bond’s average rate rose by 14.8 bps from the 6.424% fetched for the series’ last award on Nov. 18, but was 30.3 bps below the 6.875% coupon for the issue.

This was also 8.3 bps higher than the 6.489% seen for the same bond series and 7.8 bps above the 6.494% quoted for the 20-year debt at the secondary market before Tuesday’s auction, PHP BVAL Reference Rates data showed.

The auction results were in line with market expectations, but the 20-year bonds saw weak demand as players remain reluctant to lock in their cash in longer tenors due to uncertainties regarding the US Federal Reserve’s policy path and US President Donald J. Trump’s shifting trade policies, a trader said in a phone interview.

The Fed was scheduled to begin its two-day policy meeting overnight. The Fed is widely expected to keep rates unchanged, according to CME’s FedWatch Tool, while investors will monitor comments from Chair Jerome H. Powell for clues on the path of monetary policy, Reuters reported.

Meanwhile, Mr. Trump provided temporary relief to markets last week when he appeared to back down from threats to slap tariffs on European allies unless they let him take over Greenland.

But Mr. Trump said on Monday he was increasing tariffs on South Korean imports into the United States related to autos, lumber and pharmaceuticals to 25%, accusing the country’s legislature of “not living up” to its trade deal with Washington.

Meanwhile, the reissued seven-year bonds were fully awarded at lower rates as investors swamped the shorter tenor on expectations of further easing by the Bangko Sentral ng Pilipinas (BSP) amid weak economic prospects, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

On Friday, BSP Governor Eli M. Remolona, Jr. said that another cut remains uncertain, adding that while they will consider the latest Philippine gross domestic product (GDP) data when the Monetary Board meets on Feb. 19, weaker-than-expected growth wouldn’t automatically warrant further easing as inflation remains their primary concern.

The central bank has slashed benchmark borrowing costs by a total of 200 bps since its rate-cut cycle began in August 2024, bringing the policy rate to an over three-year low of 4.5%.

The government will release fourth-quarter and full-year 2025 GDP data on Thursday, Jan. 29. Analysts said slower government spending and weakening investor confidence due to a wide-ranging corruption scandal involving anomalous flood control and infrastructure projects likely continued to drag economic growth. 

Tuesday’s auction was the last for this month. Pending the result of the Tuesday tap facility offering, the government raised P324.199 billion from the domestic market in January, above the P268-billion plan as all Treasury bill (T-bill) awards were upsized and as it also opened its tap facility for another T-bond offer.

For February, the BTr aims to raise P308 billion from the domestic market, or P108 billion via T-bills and up to P200 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy with Reuters