The national government successfully auctioned off its 20-year Treasury bonds (T-bonds) on Tuesday, Sept. 3, with rates closely aligned with secondary market levels as expectations for slowing inflation persist.

The Bureau of the Treasury raised P30 billion through the reissued bonds, attracting total bids of P49.435 billion—1.6 times the amount offered.

The Treasury said Tuesday’s auction increased the total outstanding volume for the series to P121.1 billion. 

The bonds, with a remaining life of three years and one day, were awarded at an average rate of 6.025 percent, with tendered yields ranging from a high of 6.050 percent to a low of 5.975 percent.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that the average yield from Tuesday's auction closely matched the three-year PHP Bloomberg Valuation Service Reference yield of 6.02 percent, the lowest level since Feb. 2, 2024.

“Ahead of the latest headline inflation data on Sept. 5, 2024 that is expected to ease/improve/revert back to within the BSP’s [Bangko Sentral ng Pilipinas] inflation target of two percent to four percent range,” Ricafort remarked.

In July, the country’s inflation rate reached a nine-month high of 4.4 percent, but Ricafort said it likely slowed last month due to lower tariff rates on imported rice.

“Thereby, [this] could justify/support further local policy rate cuts that could match future Fed [US Federal Reserve] rate cuts expected from 2024-2026 by a total of at least -2.25 basis points,” he said.

The BSP last Friday projected the annual rate of increase in prices of basic goods and services to have settled between 3.2 percent and four percent in August. 

This means that inflation would have returned to the government's targeted three percent to four percent band of manageable year-on-year price hikes conducive to economic growth, as in the seven months before July's spike. (Derco Rosal)