THE GOVERNMENT made a full award of the reissued 10-year Treasury bonds (T-bonds) it offered on Tuesday as its yield dropped on expectations of benign inflation in the next two years.

The Bureau of the Treasury (BTr) raised P30 billion as planned from the T-bonds as the offer was more than twice oversubscribed, with bids amounting to P68.664 billion.

The reissued 10-year papers, which have a remaining life of four years and 10 months, fetched an average rate of 2.782%, down by 40 basis points (bps) from the 3.182% quoted when these papers were last offered on June 23, where the BTr likewise awarded P30 billion as planned.

The bonds on offer yesterday were originally issued on Sept. 9, 2015 with a coupon of 3.625%. Yesterday’s full award brought the total outstanding volume for the series to P203.7 billion.

The five-year T-bonds — the tenor closest to the remaining life of the issue — were quoted at 2.672% at the secondary market yesterday, based on the PHL Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said the tenor’s average yield declined as investors remain awash with cash and amid lower inflation expectations in the coming years.

“The inflation outlook is benign. There is also strong liquidity [in the market] with a heavy bias on the belly tenors,” Ms. De Leon told reporters via Viber after the auction on Tuesday.

A trader said the central bank’s lower inflation forecasts kept yields low even as investors await more signs of economic recovery.

The Bangko Sentral ng Pilipinas (BSP) left benchmark rates unchanged at its Oct. 1 policy meeting, citing easing inflation and ample liquidity in the financial system.

At its fifth policy review this year, the Monetary Board kept the rates on the BSP’s overnight reverse repurchase, lending and deposit facilities unchanged at their record lows of 2.25%, 2.75% and 1.75%, respectively.

At that meeting, the BSP said its inflation forecast for this year was revised downwards to 2.3% from the previous 2.6% estimate. It also lowered its inflation outlook for 2021 and 2022 to 2.8% (from three percent) and three percent (from 3.1%).

Inflation eased for the second straight month in September to its slowest level in four months on the back of moderating prices in the heavily weighted food and nonalcoholic beverages, the Philippine Statistics Authority (PSA) reported earlier this month.

Preliminary PSA data showed headline inflation stood at 2.3% in September, the slowest since May’s 2.1%. This was also slower than the 2.4% seen in August, but faster than the 0.9% print in September 2019.

Headline inflation averaged at 2.5% in the first nine months, within the BSP’s 2-4% target for the year.

The Treasury is looking to raise P140 billion from the domestic market this month: P80 billion in weekly Treasury bill auctions and P60 billion in fortnightly T-bond auctions.

The government wants to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — KKTJ

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