Concerns over potential protectionist measures from the Trump 2.0 administration, along with expectations of fewer US Federal Reserve rate cuts in 2025, drove up demand for long-term government debt papers.
On Tuesday, Jan. 14, the Bureau of the Treasury (BTr) successfully raised P30 billion through the auction of reissued seven-year bonds.
The government exceeded its planned amount by raising P54.22 billion in bids, nearly double the P30 billion offered and surpassing the P40.9 billion from the previous similar auction three months ago.
The bonds, which have a remaining life of seven years and eight months, were awarded at an average rate of 6.249 percent.
Based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate, this average rate is 9.1 basis points higher than the corresponding corporate bonds in the secondary market, at 6.158 percent.
According to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), the 6.249-percent average yield is higher than the 6.16 percent yield of a similar bond on Jan. 13.
Notably, the current interest rate significantly increased by 55.9 basis points from the 5.690 percent rate recorded in October last year.
According to Ricafort, this increase is mainly due to higher U.S. Treasury yields, which are at their highest level in about five and a half months, driven by expectations of possible protectionist measures from Donald Trump, who will be inaugurated next week, Jan. 20.
Likewise, the increase in global crude oil prices contributed to this rise, the economist said. He further cited the expectations for fewer U.S. Federal Reserve rate cuts in 2025 as a major factor in the increase in interest rates.