Gov’t hits P35-bond sale goal
The government was able to raise its target amount of long-dated local debt from Tuesday’s dual Treasury bond (T-bond) sale, as yields eased amid growing expectations of further rate cuts.
The Bureau of the Treasury raised P20 billion via reissued T-bonds with a remaining life of four years and seven months.
Demand for the five-year debt paper reached P71.687 billion, exceeding the original offer size by 3.5 times.
“The 5-year T-bond average auction yields are lower amid dovish signals from local monetary authorities on another rate cut, leading investors to lock in yields before they go down further in the coming months amid strong demand,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp.
He added that economic growth was expected to slow from the 5.5 percent recorded in the second quarter, largely due to a decline in government infrastructure spending, giving the central bank more room to cut policy rates.
The Bangko Sentral ng Pilipinas (BSP) lowered its benchmark interest rate to 4.75 percent last month, with further reductions expected to 4.5 percent by year-end. Analysts also project more monetary easing through 2026.
Last October’s interest rate was BSP’s fourth consecutive rate cut this year.
The T-bond’s average rate eased to 5.649 percent, lower than the 5.772 percent seen in the previous auction of the five-year debt note last Sept. 9.
The average yield was also lower than the 5.7045 percent quoted for the same tenor in the secondary market, bringing it close to a one-year low.
Meanwhile, the Treasury also borrowed P15 billion via T-bonds with a remaining maturity of nine years and five months.
Total bids reached P66.431 billion, oversubscribing the original offer by 4.4 times.
In turn, the T-bonds fetched an average rate of 5.894%, slightly down from the 6.043 percent recorded in the last offering of the 10-year debt note on Oct. 7.
The latest yield was also below the 5.9437 percent quoted for the same tenor in the secondary market.
Still, according to Ricafort, the drop in yields was offset by investor caution on longer-term bonds amid a weaker peso and lingering global inflation risks.
This year, the government plans to borrow P2.6 trillion from lenders to plug a projected budget deficit of P1.6 trillion, equivalent to 5.5 percent of GDP. The funding drive is expected to push the debt stock to P17.36 trillion by year’s end.
