Dual-tenor bonds partially sold
By Aaron Michael C. Sy, Reporter
THE GOVERNMENT awarded only a portion of its dual-tenor Treasury bond offer on Tuesday after investors demanded higher yields, reflecting expectations of rising borrowing costs amid surging global oil prices and tighter monetary conditions.
The Bureau of the Treasury (BTr) raised P25 billion, below the P40-billion program, as total bids reached P45.99 billion for both tenors.
The outcome reflected stronger demand for shorter-dated securities, while appetite for longer maturities weakened due to inflation and interest rate risks.
For the reissued seven-year bonds, the government raised the full P20 billion programmed. Total bids reached P27.76 billion. The issue brought the outstanding volume of the series to P426.7 billion, according to the BTr.
The bonds, which have a remaining life of four years and two months, were awarded at an average rate of 6.741%, with accepted yields ranging from 6.6% to 6.799%.
Market pricing moved higher compared with prior issuances, reflecting expectations of continued monetary tightening.
The average yield was also above secondary market levels for comparable maturities ahead of the auction.
A trader said market participants continued to favor shorter tenors due to narrower yield spreads between available maturities.
“End-users will likely favor the shorter bond as the spread between the two tenors is only 11.6 bps,” the trader said in a text message.
In contrast, the government raised only P5 billion from the reissued 10-year bonds, below the P20-billion target. Total bids reached P18.1 billion.
The shortfall highlighted weaker demand for longer-dated debt as investors reassessed risk exposure amid inflation pressures and global uncertainty.
The 10-year bonds were awarded at an average rate of 6.857%, with accepted yields ranging from 6.8% to 6.87%. This brought the outstanding volume of the series to P313.2 billion.
The average yield was higher than both previous auction results and secondary market pricing, indicating continued upward pressure on long-term borrowing costs.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said demand for longer maturities was affected by concerns over inflation risks tied to external shocks.
He cited geopolitical tensions and rising crude oil prices as key factors influencing market sentiment, since these could sustain inflationary pressures and prompt further tightening by the Bangko Sentral ng Pilipinas.
The Monetary Board raised policy rates by 25 basis points last week, its first increase since October 2023.
The central bank signaled the possibility of further gradual tightening as it seeks to manage inflation expectations amid global energy market volatility.
BSP Governor Eli M. Remolona, Jr. said policymakers might implement “a succession of modest rate hikes” to ensure inflation remains within target over the medium term.
The BSP also raised its inflation forecasts to 6.3% for 2026 and 4.3% for 2027, both above its 2% to 4% target.
Global oil prices extended gains on Tuesday, adding to inflation concerns. Brent crude rose 2.1% to $110.55 per barrel, while West Texas Intermediate climbed 1.9% to $98.17 per barrel.
Markets remained sensitive to geopolitical developments in the Middle East, which have affected energy supply expectations and investor risk appetite.
The Philippines completed its April domestic borrowing program after raising P258.18 billion, slightly above its target of P248 billion.
For May, the BTr is targeting P268 billion in domestic borrowing — P128 billion in Treasury bills and P140 billion in Treasury bonds.
The government relies on both domestic and foreign borrowing to finance its budget deficit, which is capped at P1.61 trillion or 5.3% of gross domestic product this year.
