Gov’t raises fresh P25B from T-bonds

MANILA  -The national government raised P25 billion as planned from reissued 10-year Treasury bonds (T-bonds), but the full award again saw the cost of borrowing rise amid signals that the United States Federal Reserve may raise its policy rate in July.

The T-bonds, originally issued in September 2022 and with a remaining life of nine years and two months, fetched an average rate of 6.243 percent.

The new average was 28.5 basis points (bps) higher than the 5.958 percent seen in the previous reissuance, which was in May.

Even then, the auction committee led by the Bureau of the Treasury said the resulting average rate was still lower than the coupon rate of 6.75 percent set on its first issuance in September 2022.

Oversubscribed

“The auction was 1.9 times oversubscribed with total tenders reaching P48.7 billion,” the committee said in a statement.

Meanwhile, the new average rate was higher than prevailing rates for corresponding deals at the secondary market.

The Bloomberg Valuation Service pegged the rate on corresponding corporate bonds at 6.186 percent or 5.7 bps lower.

Also, the rate on corresponding government securities was pegged at 6.131 percent or 11.2 bps lower.

US bonds

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the yield on nine-year T-bonds increased in line with those of US bonds, particularly because of signals from the US Fed about one or two more rate hikes for the rest of the year.

“The financial market is also expecting a 25-bps Fed rate hike (at their next policy meeting) on July 26, which the Bangko Sentral ng Pilipinas might match,” Ricafort said.

He added that the recent rise in the US government’s debt ceiling increased supply of US Treasuries, which led to relatively higher yields that are attracting investments away from markets like the Philippines. INQ

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