Gov’t raises P30 billion from T-bonds

The government was able to fully raise its target amount of long-dated local debt during Tuesday’s auction of Treasury bonds (T-bonds) amid market expectations of interest rate cuts by the US Federal Reserve (Fed) this week.

Auction results showed the Bureau of the Treasury (BTr) fully awarded the offer of P30 billion via reissued 10-year T-bonds as total bids reached P96.3 billion, more than thrice the available volume.

The BTr said the-year debt paper, which has a remaining life of nine years and four months, fetched an average rate of 5.967 percent

This was lower compared to the 6.06 percent quoted for the comparable 10-year debt note in the secondary market as of Sept.16.

This was also lower than the 6.212 percent seen during the previous award for this tenor, made last July 16.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the debt paper’s cost was lower “amid recent market expectations of a possible larger 50 basis points (bps) Fed rate cut on the next Fed rate-setting meeting on Sept. 18.”

The American central bank is expected to reduce interest rates by 25 basis points (bps) at its two-day policy meeting today, according to the majority of economists surveyed in a Reuters poll.

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The Fed has kept its benchmark overnight interest rate at the current range of 5.25 to 5.50 percent for a year, following a 525 bps increase since 2022.

The Philippine government aims to raise P195 billion from the domestic market this month, of which P80 billion will come from Treasury bills and P115 billion via T-bonds.

It also borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6 percent of the total economic output for this year. —Mariedel Irish U. Catilogo INQ