THE GOVERNMENT fully awarded the reissued Treasury bonds (T-bonds) it offered on Tuesday at a higher average yield as the market expects the Bangko Sentral ng Pilipinas (BSP) to hike borrowing costs next month.
The BTr successfully raised P30 billion through the reissue of 10-year bonds during Tuesday’s auction, with total bids reaching P40.828 billion, surpassing the expected amount.
The bonds were granted with an average interest rate of 6.512%, and have a remaining term of five years and three months. The accepted yields ranged from 6.35% to 6.625%.
The reissued bonds had an average rate that was 29.2 basis points higher than the 6.22% rate when they were previously offered on Aug. 30. However, this was 35.3 basis points lower than the 6.875% coupon for the series.
According to data from the Treasury’s PHP Bloomberg Valuation Service Reference Rates, the average yield for the five-year bond was 6.3 bps higher than the quoted rate of 6.459%. This is also 11.7 bps higher than the yield of 6.405% for 10-year bonds maturing on Jan. 10, 2029, which were traded in the secondary market before Tuesday’s auction.
The Bureau of Treasury (BTr) stated on Tuesday that the reissued 10-year Treasury Bonds (FXTN 10-64) were completely awarded at today’s auction. These bonds, with a remaining term of five years and three months, had an average rate of 6.512%.
“The auction received 1.4 times more tenders than the total program amount of P30 billion, with a total of P40.8 billion in tenders. As a result, the committee has increased the full program amount to P30 billion, making the total outstanding volume for the series now P355 billion,” the statement declared.
According to a trader interviewed over the phone, the yields of T-bonds were higher than what the market had anticipated. This is due to investors anticipating a raise in benchmark interest rates by the BSP.
The possibility of additional tightening from the BSP’s Monetary Board at their Nov. 16 review has increased due to the rise in September headline inflation.
The BSP has maintained a 6.25% policy rate for the past four meetings, following a 425 basis point increase from May 2019 to March 2020 in an effort to control inflation.flation.
The rate of acceleration increased to 6.1% in September compared to 5.3% in August, according to data released last week.
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In the first nine months, the average consumer price index was 6.6%, which is higher than the BSP’s forecast of 5.8% and their target range of 2-4% for the year.
After the data was made public, the BSP stated that it is prepared to resume tightening its monetary policy if needed in order to prevent a further increase in overall price levels.
A trader stated in an email on Tuesday that the increased T-bill rates were due to worries about inflation caused by the recent increase in global oil prices following the Israeli-Palestinian conflict outbreak.
According to Rizal Commercial Banking Corp.’s Chief Economist Michael L. Ricafort, the use of information and communication technology (ICT) in the Middle East has resulted in a surge in demand for low-risk investments such as US Treasuries, leading to an increase in their yields. This was conveyed through a message on the messaging app Viber.
The BTr plans to collect P150 billion from the local market in the current month, with P60 billion through Treasury bills and P90 billion through T-bonds.
The government obtains loans from both domestic and international sources to finance its budget shortfall, with a limit of 6.1% of the gross domestic product for this year.