EASING inflation rate forced investors to further lower their asking yield, allowing the national government to fully raise P20 billion from Tuesday’s auction of Treasury bonds (T-bonds).
The Bureau of the Treasury (BTr) made a full award for its Tuesday tender of 10-year T-bonds as yields stood at 6.224 percent, the lowest in five months.
The rates for the government securities ranged between 6.15 percent to 6.244 percent.
The Philippine Statistics Authority (PSA) reported on Tuesday that the country’s inflation rate in November slowed to 4.1 percent.
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort explained that the T-bonds average rate matched the comparable secondary market benchmark level.
Ricafort pointed out that the yields have dropped to “new” five-month lows already.
“The 10-year T-bond auction yield also eased amid relatively higher total bids/demand: P40.651 billion, more than twice the total offering of P20 billion, which was fully awarded,” he said.
“The said yield is much lower by -0.557 [basis points] compared to 6.781 [percent] during the previous 10-year T-bond auction on November 14, 2023 or exactly three weeks ago; as the comparable benchmark 10-year US Treasury yield also eased recently, now at 4.24 percent, among 2.5-month lows and already down by -0.78 [basis points] from the immediate high of 5.02 [percent] posted on October 23, 2023,” he added.
Analysts have also attributed the easing T-bonds yields to the continuous decline of global oil prices as well as market expectations of a rate cut by the Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) in the near term.
However, the Bank of the Philippine Islands (BPI) said that “local bond yields may stay elevated as the BSP continues to fight inflation, although the recent decision of the Federal Reserve to maintain its rates may offset this.”
BPI’s view echoes that of the Asian Development Bank’s that last month linked the hawkish stance of the BSP to a 30-basis point increase in the 2-year government bond yields and 35 bps for the 10-year bond yields. (See https://businessmirror.com.ph/2023/11/28/bond-yields-tied-to-high-interest-tack-adb/)
The Treasury’s T-bonds auction last Tuesday is the bureau’s second for the month and the first for long-term T-bonds.
On Monday, the Treasury kick-started its December borrowing program with a mixed award, raising nearly P9.7 billion from the sale of Treasury bills (T-bills) on the back of an upsized 91-day T-bills award.
For December, the Treasury plans to raise P100 billion from the tender of Republic promissory notes. The Treasury will hold two auctions of T-bills this month each with P10 billion offering and two tenders of T-bonds each with P20 billion programmed amount.