THE GOVERNMENT made a partial award of the reissued Treasury bonds (T-bonds) it offered on Tuesday as yields rose, with the market pricing in expectations of higher borrowing costs here and in the United States.
The Bureau of the Treasury (BTr) borrowed only P21.378 billion via the reissued 20-year bonds it auctioned off, below the P30-billion target, as tenders reached just P27.578 billion.
This brought the outstanding volume for this bond series to P643.8 billion, it said in a statement after the auction.
The reissued papers, which have a remaining life of four years and nine months, were awarded at an average rate of 7.83%, with accepted bid yields ranging from 7.7% to 7.87%.
This was up by 39.2 basis points (bps) from the 7.438% fetched for the series’ last award on Sept. 22, but was 17 bps below the 8% coupon rate for the issue.
This was also 12.3 bps higher than the 7.707% fetched for the same bond series and 15.2 bps above the 7.678% quoted for the five-year debt — the benchmark tenor closest to the remaining life of the papers on offer — at the secondary market before Tuesday’s auction, based on PHL Bloomberg Valuation Service Reference Rates data provided by the BTr.
The T-bonds fetched a higher average yield as investors remain hesitant about locking in their cash in longer bond tenors amid heightened inflation risks due to the ongoing Middle East conflict, especially as global oil prices stay elevated and the peso stays weak, with a strong El Niño event also expected to push up consumer costs further, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
These price pressures could lead to further monetary tightening here and abroad, driving up borrowing costs, he said.
Meanwhile, a trader said the T-bond yields were within market expectations as traders stay on the sidelines before the Bangko Sentral ng Pilipinas’ (BSP) policy meeting on Thursday.
A BusinessWorld poll showed 20 of 22 analysts expect the Monetary Board to raise benchmark rates by 25 bps for a fourth consecutive meeting on Thursday, which would bring the policy rate to 5.25%.
This would match the benchmark rate set in June 2025 and will be the highest in one-and-a-half years since the 5.5% in April 2025.
Two other analysts priced in a 50-bp rate hike this week, saying that a more aggressive move could prevent the BSP from falling behind the curve.
Since April, the central bank has already hiked key borrowing costs by a cumulative 75 bps.
Meanwhile, Fed funds futures traders see the Fed holding rates steady at its Oct. 27-28 meeting and are pricing in 91% odds of a hike in December, Reuters reported.
Recent comments from Fed officials, including Chairman Kevin Warsh, also suggest policymakers are in no rush to hike rates again.
On Friday, Mr. Warsh expressed optimism about US economic strength but gave no indication of whether or when more hikes would be needed.
Crude prices resumed their climb on Tuesday as markets weighed an executive order from US President Donald J. Trump that waived some sanctions and tariffs on Russian energy.
US crude rose 0.18% to $103.85 a barrel and Brent rose to $109.64 per barrel, up 0.08% on the day.
Mr. Ricafort added that weak demand for the bond offer also pushed up rates, with high bid yields leading to the partial award.
He said market liquidity may have been siphoned off by the government’s recent retail Treasury bond offering as well as the initial public offering of Mynt, Inc., the parent of e-wallet giant GCash, which debuted on the stock market on Tuesday.
The BTr wants to raise P418 billion from the domestic market this month, or P168 billion in Treasury bills and P250 billion in 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