THE GOVERNMENT made a partial award of its dual-tranche Treasury bond (T-bond) offering on Tuesday as the market asked for higher yields, with elevated global rates and oil prices expected to further stoke inflation pressures.
The Bureau of the Treasury (BTr) raised just P25.831 billion via its dual-tenor T-bond offer, below its P35-billion goal, even as total bids reached P40.791 billion.
Broken down, the Treasury raised P15.422 billion from the reissued seven-year bonds, lower than the P20-billion plan even as the tenor drew P25.292 billion in tenders.
This brought the total outstanding volume for this issue to P537.2 billion, the BTr said.
The bonds, which have a remaining life of three years and nine months, fetched an average rate of 7.678%. Accepted bid yields ranged from 7.5% to 7.7%.
The average yield rose by 69 basis points (bps) from the 6.988% fetched for the series’ last award on Aug. 18 and was higher by 130.3 bps than its 6.375% coupon.
It was also up by 7.8 bps from the 7.6% fetched for the same bond series at the secondary market before Tuesday’s auction and 20.6 bps above the 7.472% quoted for the four-year bond, the benchmark tenor closest to the remaining life of the issue, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.
Meanwhile, the government raised only P9.959 billion from the reissued 25-year T-bonds it auctioned off, below the P10-billion on offer, even as bids were at P15.679 billion.
This put the outstanding volume for this bond series at P130.6 billion.
The notes, which have a remaining life of 23 years and three months, were awarded at an average rate of 8.002%, with accepted tenders having rates of 7.95% to 8.1%.
The average yield was 60.2 bps higher than the 7.4% fetched for the series’ last award on March 24 and was also 162.7 bps above its 6.375% coupon.
Still, this was lower by 20.1 bps from the 8.203% seen for the same bond series and by 20 bps from the 8.202% quoted for the 25-year bond at the secondary market before Tuesday’s auction, PHP BVAL Reference Rates data showed.
Demand for the offer was tepid as the market remains hesitant to lock in their cash in longer instruments due to the widening conflict in the Middle East that has pushed up global crude oil prices amid supply concerns, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
This, along with a weak peso, minimum wage hikes, and a strong El Niño until early next year could increase inflationary pressures, which may lead to further monetary policy tightening, he said.
The bond offer saw weak demand as the market grows cautious over rising yields, a trader added in a text message.
The benchmark 10-year yield was down 5 bps at 5.193%, inching away from the 24-year high of 5.364% it hit last week, Reuters reported.
Brent crude futures fell 1.4% to $105.20 as traders weighed the prospect of more diesel supplies from Russia, amid an elusive “energy truce” between Moscow and Kyiv declared by US President Donald J. Trump.
A toxic mix of inflationary pressure from elevated energy prices and worries about ballooning government debt has triggered several bouts of bond sell-offs in recent weeks, pushing borrowing costs to multi-decade highs across the globe.
Traders are awaiting US inflation data on Wednesday for clues on the Federal Reserve’s policy path. They are pricing in an 80.6% chance that the Fed holds rates steady later this month, up from 51% a month earlier, according to the CME FedWatch tool.
Meanwhile, Philippine inflation accelerated to a three-and-a-half year high of 7.2% in September after the prices of fuel, food, housing and utilities surged.
This was faster than the 6.1% in August and 1.7% in September 2025 and matched this year’s peak first recorded in April.
September also marked the seventh consecutive month that inflation exceeded the central bank’s target. This brought the year-to-date average to 5.4%.
With this, analysts now expect the Bangko Sentral ng Pilipinas (BSP) to deliver a fourth straight rate increase at the Monetary Board’s Oct. 22 meeting to keep inflation expectations from de-anchoring due to possible second-round effects, with some also expecting borrowing costs to remain higher for longer as upside risks linger.
The BSP has hiked benchmark rates by 75 bps since April as the energy price shock caused by the Middle East conflict has pushed up domestic consumer prices.
The BTr targets to raise P418 billion from the domestic market this month, or P168 billion via Treasury bills and P250 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.659 trillion or 5.4% of gross domestic product this year. — Aaron Michael C. Sy with Reuters