Gov’t fully awards dual-tranche T-bond offering

THE GOVERNMENT made a full award of the dual-tranche Treasury bonds (T-bonds) it offered on Tuesday at mixed rates as players moved to buy securities at the start of the year.

The Bureau of the Treasury (BTr) raised a combined P50 billion as planned via its dual-tenor T-bond sale as total bids reached P124.747 billion, or more than double the amount placed on the auction block.

Broken down, the Treasury borrowed P20 billion via the reissued seven-year bonds, with total bids reaching P52.082 billion or more than double the amount on offer.

This brought the total outstanding volume for the bond series to P295.6 billion, the BTr said in a statement.

The bonds, which have a remaining life of two years and seven months, were awarded at an average rate of 5.467%. Accepted yields ranged from 5.375% to 5.489%.

The average rate of the reissued papers fell by 31.2 basis points (bps) from the 5.779% fetched for the series’ last award on April 19, 2022, but was 171.7 bps above the 3.75% coupon for the issue.

This was 1.5 bps higher than the 5.452% fetched for the same bond series but 4.9 bps below than the 5.516% 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 P30 billion from the reissued 10-year T-bonds, with total bids for the tenor reaching P72.665 billion or over twice the auction volume.

This brought the total outstanding volume for the bond series to P522.6 billion.

The reissued papers, which have a remaining life of nine years and three months, were awarded at an average rate of 5.985%, with tenders awarded carrying yields from 5.973% to 5.99%.

The 10-year bond’s average rate rose by 10.9 bps from the 5.876% fetched for the series’ last award on Dec. 2, but was 39 bps below the 6.375% coupon for the issue.

This was also 0.3 bp below the 5.988% seen for the same bond series and 7.3 bps lower than the 6.058% quoted for the 10-year debt at the secondary market before Tuesday’s auction, PHP BVAL Reference Rates data showed.

The government fully awarded its T-bond offer as it saw strong demand as players are loading up their portfolios, and with rates fetched near secondary market levels, a trader said in a phone interview.

The trader added that appetite for the bonds stayed strong even as December inflation came out higher than expected.

Philippine headline inflation picked up to 1.8% last month from 1.5% in November, but slowed from 2.9% in December 2024.

The December clip was within the Bangko Sentral ng Pilipinas’ (BSP) 1.2-2% forecast for the month, but was above the 1.4% median estimate in a BusinessWorld poll of 14 analysts.

For 2025, the consumer price index averaged 1.7%, the slowest in nine years or since the 1.3% recorded in 2016. This was slightly above the BSP’s 1.6% forecast for the year but below its 2%-4% target.

Meanwhile, T-bond yields ended mixed as the market remains hesitant about locking in their cash in longer tenors due to lingering risks here and abroad, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He said the peso’s recent weakness against the dollar could stoke inflation anew, while uncertainty over the US Federal Reserve’s policy path is also driving up long-end yields globally.

On Tuesday, the peso slid by eight centavos to close at a fresh near one-month trough of P59.21 against the dollar, just a shade stronger than its record low of P59.22.

The dollar index, which measures the currency against a basket of those three rivals and three more major peers, edged down 0.2% to 98.238, Reuters reported. It had popped as high as 98.861 on Monday for the first time since Dec. 10.

The closely watched US monthly employment report, due on Friday, will be key in shaping expectations for the outlook for monetary policy.

Traders currently expect two Federal Reserve interest rate cuts this year, showed LSEG calculations based on futures.

The nomination of a new Federal Reserve chair in early January is also a key event. Incumbent Jerome H. Powell’s term expires in May.

US President Donald J. Trump has pressured the Fed to cut rates, bringing central bank independence into question.

The BTr is looking to raise P180 billion from the domestic market this month, or P110 billion via Treasury bills and P70 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