Reissued 10-year T-bonds fetch lower rates

MANILA, Philippines — Rates for reissued 10-year Treasury bonds plunged yesterday following the decision of the Bangko Sentral ng Pilipinas (BSP) to cut interest rates last week, according to the Bureau of the Treasury (BTr).

During yesterday’s auction, government securities with maturing life span of nine years and four months fetched an average rate of 4.196 percent, 144.8 basis points lower than the 5.644 percent recorded in the previous auction.

This was likewise lower than the secondary market rate for the same securities, which settled at 4.372 percent before the auction closed.

The lower rates prompted the auction committee to fully award the P20 billion offering, which garnered bids amounting to P65.216 billion.

In an interview, National Treasurer Rosalia De Leon said the results of the auction was expected following the Monetary Board’s decision to cut policy rates by 25 basis points last week.

“We expect that rates will be coming down given the pronouncements by Governor Diokno and, of course, the actions of the MB last Thursday. They reduced policy rates by 25 basis points,” De Leon said.

“They are also looking at possible reserve ratio requirement cut in September, within the fourth quarter,” she said.

According to De Leon, investors are anticipating interest rates to further decline, so they are taking the opportunity to “lock in” at current rates, particularly for 10-year securities.

De Leon also said investors are now going to safe havens like the Philippines amid the worsening trade tension between the US and China.

The government borrows from both local and foreign creditors to plug the fiscal deficit, which is capped at 3.2 percent of gross domestic product (GDP) for this year.

For 2019, the national government is expected to borrow P1.19 trillion, 20 percent higher than the 2018 program of P986 billion, in expectation of the higher fiscal deficit ceiling this year.

Of the total borrowings this year, P297.2 billion is projected to come from foreign lenders, while the remaining P891.7 billion would be sourced from domestic creditors.