Reissued bonds fetch lower rates on BSP bets

The government made a full award of the Treasury bonds (T-bonds) it offered on Wednesday as rates dropped on strong demand amid expectations of continued monetary policy easing by the Bangko Sentral ng Pilipinas (BSP) this year.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned via the reissued seven-year bonds it auctioned off on Wednesday as total bids reached PHP 80.713 billion or nearly three times the amount on offer.

This brought the total outstanding volume for the bond series to PHP 254.7 billion, the Treasury said in a statement.

The bonds, which have a remaining life of five years and three months, were awarded at an average rate of 5.908%. Accepted bid yields ranged from 5.875% to 5.919%.

The average rate of the reissued papers decreased by 11.1 basis points (bps) from the 6.019% fetched for the series’ last award on March 4 and was also 46.7 bps lower than the 6.375% coupon for the issue.

However, this was 1.48 bps higher than the 5.8932% quoted for the five-year bond and 1.29 bps above the 5.8951% seen for the same bond series at the secondary market before Wednesday auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

Following the strong demand for the offering, the BTr opened its tap facility window to raise P7 billion more via the papers.

The Treasury fully awarded its T-bond offer as rates were within expected levels as investor demand was strong, a trader said in a text message.

The trader said the BTr opened its tap facility to take advantage of the robust demand to extend debt maturities.

“Still, the market is cautious ahead of tomorrow’s US ‘Liberation Day,’” the trader said.

US President Donald J. Trump was poised to impose sweeping new reciprocal tariffs on global trading partners on Wednesday, upending decades of rules-based trade, threatening cost increases and likely drawing retaliation from all sides, Reuters reported.

Details of Mr. Trump’s “Liberation Day” tariff plans were still being formulated and closely held ahead of a White House Rose Garden announcement ceremony scheduled for 4 p.m. Eastern Time (2000 GMT).

The new duties are due to take effect immediately after Mr. Trump announces them, White House spokesperson Karoline Leavitt said on Tuesday, while a separate 25% global tariff on auto imports will take effect on April 3.

The reissued bonds fetched a lower average yield versus the previous auction amid dovish signals from the BSP chief recently, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. said last week that the Monetary Board could cut rates by 25 bps at their April 10 review.

He said the BSP remains on an easing cycle and could reduce borrowing costs by as much as 75 bps this year.

The central bank has brought down benchmark interest rates by a total of 75 bps since it began its rate-cut cycle in August last year, with its policy rate currently at 5.75%.

The Monetary Board unexpectedly kept rates unchanged at its Feb. 13 review amid uncertainties due to the Trump administration’s policies.

Mr. Ricafort added that the latest round of cuts in banks’ reserve requirement ratios (RRR) that took effect on Friday, which freed up about PHP 330 billion in liquidity, also caused auction yields to go down as this likely boosted demand for government debt.

The RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions was brought down by 200 bps to 5% from 7%.

The reserve ratio for digital banks was cut by 150 bps to 2.5%, while the ratio for thrift lenders was lowered by 100 bps to 0%, now at par with rural and cooperative banks’ RRR.

The BTr is looking to raise PHP 245 billion from the domestic market this month, or PHP 125 billion via Treasury bills and PHP 120 billion through T-bonds. — A.M.C. Sy with Reuters