The national government fully awarded Treasury bonds (T-bonds), driven by strong investor interest, lower interest rates from recent reserve requirement cuts, and slowing inflation.

On Tuesday, Oct. 1, the Bureau of the Treasury (BTr) successfully raised P15 billion through the auction of reissued five-year bonds.

The government secured the planned amount after attracting bids totaling P86.4 billion, which exceeded the offered amount by nearly six times.

Demand in the latest auction surpassed the previous P69.08 billion, reflecting robust investor interest.

The bonds, which have a remaining life of four years and seven months, were awarded at an average rate of 5.508 percent.

Based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate, this average rate is slightly lower than the corresponding corporate bonds in the secondary market, at 5.57 percent.

According to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), this marks the lowest level since the third quarter of 2022, having dropped from a peak of 6.78 percent in April this year.

Low interest rates could be attributed to the recent reduction in banks’ reserve requirements (RRR), which will free up about PHP 400 billion in the financial system. 

This will allow banks to increase loans, lower loan rates, and encourage more investments in government securities, stocks, and real estate. 

“[Bangko Sentral ng Pilipinas] BSP Governor Remolona signaled further cuts in banks’ RRR possibly to zero within his term,” Ricafort said.

He also noted that if the U.S. economy weakens and inflation decreases, further rate cuts might follow, adding that global oil prices are currently at their 15-month low, which could further aid in reducing inflation.

After the auction, the committee announced that it would auction off short-term securities worth P20 billion on Monday, Oct. 7. (Derco Rosal)