BTr fully awards 10-year bonds

THE GOVERNMENT made a full award of the reissued 10-year Treasury bonds (T-bonds) it offered on Tuesday amid strong demand as investors locked in high returns on expectations of further monetary easing here and abroad next year.

The Bureau of the Treasury (BTr) raised P15 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached P53.208 billion, or more than triple the amount on offer.

This brought the outstanding volume for the series to P266.9 billion, the Treasury said in a statement.

The bonds, which have a remaining life of nine years and one month, were awarded at an average rate of 5.89%. Accepted yields ranged from 5.873% to 5.895%.

The average rate of the reissued papers inched up by 2 basis points (bps) from the 5.87% fetched for the series’ last award on Oct. 29. However, this was 36 bps lower than the 6.25% coupon for the issue.

This was 1.5 bps above the 5.875% fetched for the same bond series but 5.5 bps lower than the 5.945% quoted for the 10-year bond at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.

The Treasury said it made a full award of its bond offer as it attracted strong demand and as the issue’s average rate was lower than the prevailing benchmark yield on the 10-year paper at the secondary market.

A bond trader said the average rate fetched for the reissued 10-year bond was within market expectations.

“The demand is not surprising given that this is the last bond auction for the year and investors would like to lock in yields amid the rate cut outlook for next year,” the trader said in a text message.

T-bond yields inched up slightly versus the previous issuance amid the increase in US Treasury rates as markets remain concerned that US President-elect Donald J. Trump’s policies could stoke inflation in the world’s largest economy and result in slower and fewer Federal Reserve rate cuts next year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

BSP Governor Eli M. Remolona, Jr. last month said the Philippine central bank’s easing cycle is still underway though it may opt to keep rates steady at this month’s meeting, adding that they may not necessarily reduce rates at every quarter or every meeting.

He said the central bank will continue to make rate cuts in gradual 25-bp increments.

The Monetary Board will hold its last meeting for the year on Dec. 19. The BSP has cut benchmark borrowing costs by a total of 50 bps since kicking off its easing cycle in August, bringing its policy rate to 6%.

Meanwhile, Federal Reserve officials appear on track to cut interest rates this month after data showed the US labor market remained strong but continued to cool in November, even as debate emerged over a possible pause to rate cuts in the new year, Reuters reported.

US employers added 227,000 jobs last month, a rebound from a hurricane-impacted slowdown in October, but the unemployment rate ticked up to 4.2%, the Labor department’s monthly employment report showed on Friday.

Over the last half-year average monthly job gains are below 150,000, short of what some policy makers feel is needed to provide enough work to match a growing population, but nothing like the collapse Fed policy makers worried could happen when they began cutting interest rates a few months ago.

Traders after the jobs data put the probability of a rate cut at the Fed’s Dec. 17-18 policy meeting at 85%, up from less than 70% before the release of the report, and added to bets that short-term borrowing costs will drop another 75 bps next year — a slower pace than Fed officials anticipated in a September set of economic projections.

Those projections will be updated at the December meeting.

A quarter-percentage-point reduction this month would bring the Fed’s policy rate to the 4.25%-4.5% range, a full percentage point below where it was in September when the central bank began its easing cycle.

Tuesday’s T-bond offering was the last one for 2024. The BTr will hold its last government securities auction for the year next week, where it will offer P15 billion in Treasury bills. — A.M.C. Sy with Reuters