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Manila Bulletin devider Business devider Rate cut, slower inflation prompt decline in government long-term yields

Rate cut, slower inflation prompt decline in government long-term yields

Published Sep 17, 2024 09:26 am

The national government's reissued Treasury bonds (T-bonds) attracted strong investor demand on Tuesday, Sept. 17, driven by lower interest rates and a more stable inflation outlook.

The Bureau of the Treasury successfully raised P30 billion as planned through the auction of the reissued 10-year bonds, receiving total bids of P96.3 billion—3.2 times the offered amount.

The full allocation of the P30 billion program increased the total outstanding amount for this series to P231.9 billion.

These bonds, which have a remaining life of nine years and four months, were awarded at an average rate of 5.967 percent, lower than the 6.212 percent average rate from a similar auction on July 16.

This auction's yield is also below the current market rate for comparable bonds.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., noted that the decline in yields is attributed to expectations of a larger interest rate cut by the US Federal Reserve, along with other market factors.

The Treasury yield fell to a 15-month low of 3.63 percent, influenced by significantly low global oil prices, according to the economist.

Furthermore, he indicated that this could lead to reduced inflation and additional rate cuts by both the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

August's inflation rate dropped to a seven-month low of 3.3 percent, bringing it back within the central bank’s target range of two percent to four percent. (Derco Rosal)

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