Treasury partially awards reissued T-bonds
By Aaron Michael C. Sy, Reporter
THE PHILIPPINE GOVERNMENT partially awarded reissued 10-year Treasury bonds (T-bonds) on Tuesday, as investors stayed cautious amid rising inflation risks linked to the Middle East war.
The Bureau of the Treasury (BTr) borrowed P10.2 billion, falling short of the P20-billion offer even as bids reached P23.3 billion. The move brings the outstanding volume for the series to P308.2 billion.
The bonds, with a remaining term of nine years and 11 months, were awarded at an average yield of 6.786%, with accepted bids ranging from 6.775% to 6.8%.
The rate was 89.3 basis points (bps) higher than the 5.893% recorded at the series’ last auction on Feb. 23 and 86.1 bps above the 5.925% coupon.
Yields also surpassed secondary market quotes: 4.7 bps above the 6.739% fetched for the same series and 4.4 bps above the 6.742% indicative yield before the auction, according to PHP Bloomberg Valuation Service reference rates data supplied by the BTr.
“Demand was weak as markets remained defensive amid potential inflationary effects from the US-Iran conflict,” a trader said by telephone.
Economists warned that surging oil prices could push inflation past 7% this year while slowing economic growth by up to 0.3 percentage point. Arsenio M. Balisacan, secretary of the Department of Economy, Planning and Development, earlier said the oil shock is the primary external risk facing the economy.
Heightened expectations of monetary tightening further dampened demand.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said supply shocks from the war could push inflation above the central bank’s 2-4% target.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. has flagged the possibility of raising policy rates if higher oil prices spill over into broader inflation.
The last rate hike was on Oct. 27, 2023, when the Monetary Board lifted the policy rate by 25 bps to a 17-year high of 6.5%. Since August 2024, the BSP has cut rates by 225 bps, with the reverse repurchase rate now at 4.25%.
“Note that the BTr can afford to reject aggressive bids as borrowing is ahead of schedule,” another trader said in a text message.
The Treasury plans to raise P248 billion from the local market in March, comprising P108 billion in Treasury bills and P140 billion in T-bonds.
The government relies on both domestic and foreign borrowing to fund a fiscal deficit capped at P1.647 trillion, equivalent to 5.3% of GDP this year.
