Treasury fully awards reissued 10-year bonds

THE GOVERNMENT fully awarded the Treasury bonds (T-bonds) it offered on Tuesday as players moved to lock in still-high yields amid expectations of a rate cut by the Bangko Sentral ng Pilipinas (BSP) next week.

The Bureau of the Treasury (BTr) borrowed P30 billion as planned via the reissued 10-year bonds, with total bids for the tenor reaching P80.29 billion or more than double the amount on offer.

“The auction attracted strong demand,… underscoring the investors’ sustained appetite for government securities amid steady market conditions,” the Treasury said in a statement.

The full award brought the total outstanding volume for the series to P170 billion, it said.

The reissued bonds, which have a remaining life of seven years and six months, were awarded at an average rate of 5.859%. Accepted yields ranged from 5.8% to 5.875%.

The average rate of the reissued papers fell by 36.5 basis points (bps) from the 6.224% fetched for the series’ last award on Dec. 5, 2023 and was also 76.6 bps below the 6.625% coupon for the issue.

This was likewise 3 bps below the 5.889% fetched for the same bond series but 5.5 bps higher than the 5.804% quoted for the seven-year paper — the benchmark tenor closest to the remaining life of the issue — at the secondary market before Tuesday’s auction, based on the PHP Bloomberg Valuation Service  Reference Rates data provided by the BTr.

The Treasury fully awarded the reissued bonds as yields fetched were mostly in line with secondary market rates, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Demand was also higher than the bids seen for the BTr’s latest offering of seven-year notes last month, showing strong market appetite as investors likely wanted to secure yields at their current levels before a potential rate cut at the Monetary Board’s Feb. 19 meeting amid benign inflation and weak economic growth, he said.

BSP Governor Eli M. Remolona, Jr. earlier said a cut is possible at their policy meeting next week if they see the need to support domestic demand.

This, after Philippine gross domestic product growth slowed to a five-year low of 4.4% last year, missing the government’s 5.5%-6.5% target due to the fallout from a corruption scandal that affected both public and private spending.

However, the central bank last week reaffirmed that it was nearing the end of its current easing cycle, with further cuts to be limited and data-dependent, even as the inflation outlook remains benign.

The Monetary Board has reduced benchmark rates by 200 bps since August 2024, bringing the policy rate to 4.5%.

Analysts have said that the BSP may have room to ease its policy stance further to help stimulate economic activity as inflation remains low despite an uptick in January.

Headline inflation accelerated to 2% in January from 1.8% in December but slowed from the 2.9% in the same month last year. This was the fastest in 11 months or since 2.1% in February 2025.

It was also faster than the 1.8% median forecast from a BusinessWorld poll of 18 economists, but was within the BSP’s 1.4%-2.2% estimate for the month.

Meanwhile, a trader said that the bond auction’s result was well within market expectations.

The trader noted that the offering saw low demand compared to the BTr’s recent bond auctions as the issue is “illiquid, on the run, and on the longer end in terms of tenor.”

The average yield fetched for the issuance was slightly higher than the prevailing secondary market rate for the seven-year tenor amid the upward trend in bond yields, the trader added.

The BTr wants to raise P308 billion from the domestic market this month, or P108 billion via Treasury bills and up to P200 billion through T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy