Gov’t awards in full its reissued Treasury bonds

THE GOVERNMENT made a full award of the reissued Treasury bonds (T-bonds) it offered on Tuesday at a higher average rate than its last awarding as the Bangko Sentral ng Pilipinas (BSP) is expected to hold rate steady at its meeting on Thursday.

The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached P65.928 billion or more than twice the offered volume.

The bonds, which have a remaining life of nine years and nine months, were awarded at an average rate of 6.781%, with accepted yields ranging from 6.748% to 6.8%.

The average rate of the reissued bonds was 17.3 basis points (bps) lower than the 6.954% quoted for the papers when they were last offered on Oct. 24.

Still, this was 15.6 bps above the 6.625% coupon for the series.

The average yield was also 3.8 bps higher than the 6.743% quoted for the 10-year bond and 4.2 bps above the 6.739% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

The full P30-billion award brought the total outstanding volume of the series to P120 billion, the BTr said in a statement on Tuesday.

The full award and average rate were in line with market expectations as the BSP is expected to hold its key rate steady at its Thursday meeting, a trader said via phone interview.

A BusinessWorld poll of 18 analysts held last week showed that 15 analysts expect the Monetary Board to maintain the target reverse repurchase (RRP) rate at a 16-year high of 6.5%.

Meanwhile, the three remaining economists said the Monetary Board might hike policy rates by 25 bps to 6.75% at the Nov. 16 meeting.

The Monetary Board implemented an off-cycle 25-bp rate hike on Oct. 26, ahead of its scheduled meeting. It has raised interest rates by 450 bps since May 2022 to temper inflation.

Easing inflation and a stronger peso recently also support the expectations of a pause by the BSP, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Headline inflation for October eased to 4.9% from 6.1% in September and 7.7% in October 2022. This was also below the BSP’s 5.1-5.9% forecast for the month.

October inflation was the slowest pace in three months or since the 4.7% in July, but marked the 19th straight month that inflation breached the central bank’s 2-4% target.

Meanwhile, the peso closed at P56.06 per dollar on Tuesday, unchanged from Monday, based on Bankers Association of the Philippines data.

Year to date, it has declined by 30.5 centavos or 0.55% from its P55.755 per dollar close on Dec. 29, 2022.

The local currency has remained above the P56 per dollar level since early August but has recently strengthened to the P55 per dollar level when it first closed at P55.91 on Nov. 6.

The BTr plans to borrow P225 billion from the domestic market this month, or P75 billion via T-bills and P150 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — Aaron Michael C. Sy

Neil Banzuelo

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