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Manila Bulletin devider Business devider Gov't long-term yields drop as investors prepare for BSP rate cut this week

Gov't long-term yields drop as investors prepare for BSP rate cut this week

Published Feb 11, 2025 07:19 am

Long-term government debt yields fell on Tuesday, Feb. 11, amid expectations of a 25-basis-point cut in key borrowing costs by the Bangko Sentral ng Pilipinas (BSP) and easing U.S. Treasury yields.

The Bureau of the Treasury (BTr) raised ₱30 billion ($540 million) through an auction of seven-year bonds. Bids totaled ₱67.6 billion, more than double the amount offered and surpassing the ₱54.22 billion from the previous similar auction.

The bonds, with a remaining life of seven years and seven months, were awarded at an average rate of 5.973 percent. This is slightly lower than the 5.994 percent for comparable corporate bonds in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rate.

It also represents a nearly two-month low, down from 6.249 percent at the last seven-year bond auction in January, according to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC).

Ricafort attributed the decline to lower U.S. Treasury yields, noting that the current administration has prioritized influencing long-term interest rates over the Federal Reserve's policy.

He said local yields tracked the seven-year U.S. Treasury yield, which fell to 4.42 percent.

Domestically, Ricafort cited expectations of a 25-basis-point rate cut by the BSP on Feb. 13 and low global oil prices as reinforcing hopes for further monetary easing.

On Monday, the treasury also awarded all bids for Treasury bills (T-bills) on tha back of strong market demand.

The auction was 2.3 times oversubscribed, receiving ₱50.1 billion in total tenders, prompting the government to raise the full ₱22 billion program.

Ricafort noted that the T-bills' average auction yields registered a slight increase after a five-week decline.

He said this correction comes ahead of the anticipated 0.25 basis point rate cut by the BSP this week.

Ricafort added that the increased market demand for long-term local government securities also contributed to the higher yields.

The 91-day T-bill fetched an average rate of 5.128 percent, the 182-day T-bill 5.562 percent, and the 364-day T-bill 5.726 percent.

In comparison, the PHP BVAL yield was 5.170 percent for the three-month tenor, 5.496 percent for the six-month tenor, and 5.720 percent for the one-year tenor.

Related Tags

Treasury bonds government borrowings Bureau of the Treasury
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