THE national government on Tuesday raised P30 billion from the sale of Treasury bonds (T-bonds) consistent with the upward correction in US Treasury yields.
The Bureau of the Treasury (BTr) made a full award of reissued 3-year T-bonds in an auction on Tuesday that saw the average yield increase to 6.007 percent. The average yield from the previous 3-year T-bonds auction last January 3, 2024, was at 5.90 percent.
The investors’ yield for the T-bonds ranged from 5.950 percent to 6.050 percent.
The reissued bond series 03-30, which has a remaining term of two years and 11 months, was “broadly in line” with the current secondary market. The coupon rate for the fresh government securities was set at 6.011 percent.
“The auction was 2.1 times oversubscribed with total tenders reaching P62.4 billion. With its decision, the committee raised the full program of P30.0 billion, bringing the total outstanding volume for the series to P60.0 billion,” the Treasury said after the tender of T-bonds.
This, according to Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort, is more than twice the offering of P30 billion which was fully awarded.
“This is consistent with the upward correction in PHP BVAL yields and US Treasury yields since the start of January 2024,” Ricafort said adding he “considered healthy” the correction.
The RCBC executive also linked the correction to the decline posted in the November-to-December 2023 period “as the markets priced in possible US Central Bank (Fed) rate cuts later in 2024 after the Fed on December 13, 2023, made a pivot and started to signal -0.75 Fed rate cuts for 2024.”
Ricafort said the pricing-in of the rate cuts ensued as global crude oil prices corrected higher to two-month highs recently. The latter was due to increasing tensions at the Red Sea over the past two months as international ships continued to report attacks by Houthi rebels.
The RCBC economist added that the El Niño drought experienced until the second quarter of 2024, which could reduce rainfall and in turn limit the production of rice and other agricultural products, would therefore lead to some “pick up in food/agricultural prices and overall inflation.”
Ricafort added that the recent volatility in the exchange rates between the greenback and the peso to three-month highs could also lead to some pick up in import prices and overall inflation.
The next auction for T-bonds is on February 5, 2024, with 91- day, 182- day and 364-day tenors with a total value of P15 billion, according to the Treasury.
The Treasury, in its auctions this year, has also yet to make a partial award, mixed award, or full rejection.
This year’s borrowing program would still follow a 75:25 mix in favor of domestic sources.
The Marcos administration will borrow P1.853 trillion from the domestic market through the sale of T-bonds and T-bills.
The Treasury will tender a total of P1.802 trillion worth of T-bonds and P51.050 billion worth of T-bills for the entire 2024.
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