Robust demand pulls down T-bond rates

The government borrowed the P30 billion that it wanted from the issuance of long-term debt, as strong demand from market players brought down interest rates.

Auction results on Tuesday showed that the Bureau of the Treasury (BTr) borrowed the full P30 billion via reissued 20-year Treasury bonds (T-bonds). Total bids reached P114.896 billion, or more than 3.8 times larger than the original issuance.

According to the BTr, the 20-year debt paper, which has a remaining life of seven years and eight days, fetched an average rate of 6.286 percent, a bit cheaper compared to the 6.378 percent quoted for the comparable seven-year debt note in the secondary market as of July 8, based on Peso Bloomberg Valuation Service Reference Rates data provided by the Treasury.

August cut

This, after the Monetary Board hinted at a possible rate cut as early as August, even ahead of the US Federal Reserve, said chief economist Michael Ricafort of Rizal Commercial Banking Corp.

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Bangko Sentral ng Pilipinas Governor Eli Remolona said in an economic briefing earlier this week that the Monetary Board is “somewhat more likely” to reduce the policy rate by a total of 50 basis points this year and ahead of the Fed, which is likely to cut in September.

The government wants to raise P260 billion from T-bills and P370 billion via Treasury bonds in the third quarter. In July, the BTr is set to borrow a total of P115 billion via T-bonds.