The government is not fully issuing T-Bonds at lower interest rates as the market awaits the outcome of key meetings


THE GOVERNMENT forgave the newly issued seven-year Treasury Notes (T-Bonds) it auctioned on Tuesday in full at a lower average rate as monetary authorities’ decisions drew nearer.

The Bureau of the Treasury (BTr) on Tuesday raised 35 billion pesos as planned from its offering of newly issued seven-year securities with a remaining term of six years and eight months. Total bids reached P54.844 billion.

Interest rates allocated on Tuesday ranged from 6.375% to 6.750%, bringing the average yield for the bonds on offer to 6.588%, which was 15.2 basis points (bps) lower than the 6.740% coupon yielded for the series , when it was last offered on June 14 .

However, the median price was 13.37 basis points above the 6.4543% yield on seven-year bonds listed for issuance on the secondary market ahead of Tuesday’s auction, based on data from PHP Bloomberg Valuation Reference Rates, provided by BTr became.

National Treasurer Rosalia V. de Leon said in a Viber message to reporters that the full award was made because “[the] The prices are geared towards the secondary level.”

One trader said the award was “pretty aggressive,” similar to the coupon on the 10-year note issued last week.

“The market is now demanding higher interest rates to give the Federal Open Market Committee longer maturities [meeting]and the risk of tightening global politics,” the trader added.

Rizal Commercial Banking Corp. chief economist Michael L. Ricafort said markets are expecting the Fed to hike rates by 75 to 100 basis points on Sept. 21 amid elevated inflation.

This is “followed by another hike in local interest rates on Sept. 22 to stabilize the peso and better manage both inflation and inflation expectations,” he added in a Viber message.

The US CPI rose in August amid rising rents and healthcare costs, bolstering the case for another aggressive Fed rate hike.

Fed Chair Jerome H. Powell previously said the central bank was “strongly committed” to fighting inflation. The Fed meets on September 20-21 to review policy and has hiked rates by 225 basis points since March, including two 75 basis point moves in June and July.

At home, the BSP will hold its monetary policy meeting the following day, September 22nd. It has hiked borrowing costs by 175 basis points since May in a bid to curb rising prices.

A business world Polls last week showed that 14 out of 15 analysts expect the BSP to trigger another rate hike on Thursday. Eleven expect a 50 basis point rise, while two expect a modest 25 basis point rise. They are now betting on a large 75bp move.

GNP Governor Felipe M. Medalla said last month the central bank has scope to raise borrowing costs further as inflation remains high, with the Fed’s aggressive tightening also posing an additional risk to prices due to its impact on the peso.

Headline inflation fell to 6.3% in August, down from a four-year high of 6.4% in July. That brought the eight-month average to 4.9%, higher than the central bank’s target of 2-4% but still below the 5.4% forecast for the year.

The peso closed at an all-time low of P57.43 per dollar on Friday, down 27 centavos from its close of P57.16 on Thursday, data from the Bankers Association of the Philippines showed. Since then it has edged up slightly to P57.4 on Monday.

The BTr plans to raise 200 billion pesos from the domestic market this month, or 60 billion pesos through Treasury bills and 140 billion pesos through T-bonds.

The government is borrowing from local and external sources to fund a budget deficit limited to 7.6% of GDP this year. — Diego Gabriel C Robles

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