Government raises P30B from T-bond sale

The government was able to raise its target amount of long-dated local debt paper on Tuesday’s auction of Treasury bonds (T-bonds), accepting higher interest rates as the market continued to lock in yields ahead of a prospective rate cuts.

Auction results showed that the Bureau of the Treasury had made a full award of P30 billion in reissued T-bonds, which have a remaining life of six years and 11 months.

The total bids amounted to P73.3 billion, exceeding the size of the original offering by more than twice.

The debt paper fetched an average rate of 6.128 percent, higher than the 6.115 percent quoted for the same tenor in the secondary market as of August 12, but cheaper than the 6.286 percent in the comparable seven-year debt paper auction on July 9.

A bond trader said the auction results were driven by expectations that the Bangko Sentral ng Pilipinas (BSP) might cut policy rates as early as this week.

“The market continues to secure yields at current levels in anticipation of lower yields in the months to come,” a bond trader said.

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But BSP Governor Eli Remolona Jr. hinted earlier this week that the widely expected rate cut this month was now a “little less likely” after the inflation had accelerated in July and stronger economic growth was posted for the second quarter.

Inflation in July surged to a nine-month high of 4.4 percent, marking the first time that inflation breached the central bank’s 2 to 4 percent target range for the year. Even so, the bond trader remains optimistic that the inflation expectations may allow the Monetary Board to cut borrowing rates on Thursday during its monetary policy review.