THE GOVERNMENT made a full award of the reissued 10-year Treasury bonds (T-bonds) it offered on Tuesday at an average rate lower than secondary market levels on strong demand, with traders also reacting to US President Donald J. Trump’s post-inauguration policy announcements.
The Bureau of the Treasury (BTr) raised P30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached P93.32 billion or more than thrice the amount on offer.
The bonds, which have a remaining life of nine years and 14 days, were awarded at an average rate of 6.251%. Accepted yields ranged from 6.22% to 6.27%.
The average rate of the reissued papers rose by 36.1 basis points (bps) from the 5.89% fetched for the series’ last award on Dec. 10. This was also 1 bp higher than the 6.25% coupon for the issue.
Still, the average rate was 6.7 bps below the 6.318% seen for the same bond series and 7.5 bps lower than the 6.326% quoted for the 10-year bond at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
To accommodate the strong demand seen for Tuesday’s offer, the BTr opened its tap facility window to raise P10 billion more via the bonds at the same average rate.
The T-bonds auctioned off on Tuesday fetched yields lower than comparable benchmarks at the secondary market following Mr. Trump’s inauguration speech, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
T-bond rates were lower than market expectations as Mr. Trump’s speech caused markets to scale back their bets of a hawkish US Federal Reserve, the first trader said by phone.
The Treasury fully awarded its offer as it saw strong demand for the bonds on “improved risk sentiment,” a second trader said in a text message.
Global markets greeted Mr. Trump’s presidency with apprehension on Tuesday in moves that were highly sensitive to headlines over the newly sworn-in president’s plans for trade relations and tariffs in particular, Reuters reported.
US markets were closed for a holiday on Monday, so the first reactions to Mr. Trump’s return to the White House were felt during Asian trade on Tuesday, with European futures also pointing to a lower open.
Just as investors cheered the possibility of a delay in Mr. Trump’s implementation of tariffs following a brief mention of the topic in his inauguration speech, the US president said shortly after that he was mulling imposing 25% tariffs on Mexico and Canada as soon as Feb. 1.
Mr. Trump’s plans for hefty import tariffs have been a key area of focus for financial markets on the view that such policies will stoke inflation and run the US economy red hot again, which would boost the dollar and hurt bonds.
Some investors had expected a swift imposition of tariffs from the moment he took office, so the lack of any concrete moves initially sparked a brief relief rally across stocks and US Treasuries.
The benchmark 10-year US Treasury yield was last 7.1 basis points lower at 4.54%. Yields move inversely to bond prices.
Markets had expected that Mr. Trump would announce trade tariffs via executive orders, raising the prospects for higher-for-longer Federal Reserve policy rates.
The BTr plans to raise P213 billion from the domestic market this month, or P88 billion via Treasury bills and P125 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — A.M.C. Sy with Reuters
