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Manila Bulletin devider Business devider T-bond yields rise amid dollar strength, inflation fears

T-bond yields rise amid dollar strength, inflation fears

Published Oct 29, 2024 09:00 am

By DERCO ROSAL

Interest rates on the national government’s long-term debt have increased due to a stronger dollar, potential inflation, and higher U.S. Treasury yields amid pre-election market speculation. 

On Tuesday, Oct. 29, the Bureau of the Treasury (BTr) successfully raised P15 billion through the auction of 10-year bonds. Despite relatively low demand, the government attracted bids totaling P43.28 billion, nearly three times the P15 billion offered.

Investor interest declined in the latest auction, with demand falling below the P96.35 billion recorded in the mid-September 10-year T-bond auction. The bonds, which have a remaining life of nine years and two months, were awarded at an average rate of 5.870 percent. According to the PHP Bloomberg Valuation (BVAL) Service Reference Rate, this average rate is slightly higher than the corresponding corporate bonds in the secondary market, which stand at 5.850 percent.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), noted that the slight increase in T-bond yields to 5.870 percent is influenced by a stronger dollar-peso exchange rate, potential inflationary pressures, and higher U.S. Treasury yields amid market speculation regarding the upcoming U.S. elections. Despite this rise, Ricafort observed that this week’s T-bond yield fell by 9.7 basis points from 5.967 percent in the same auction over a month ago (Sept. 17).

He also pointed out that this drop follows a local policy rate cut and a reduction in the reserve requirement ratio (RRR) last week, which freed up about P400 billion for potential lending and investment. Additionally, recent declines in global oil prices could help ease inflation, supporting the possibility of future rate cuts by both the Fed and the BSP.

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Treasury bonds T-bonds Bureau of the Treasury
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