Philippine gov’t partially awards P29.6bn reissued 20-year bonds as yields jump
The Bureau of the Treasury borrowed P29.561 billion from reissued 20-year bonds, just short of the P30-billion target, as the average yield rose to 7.218% on risk-off sentiment from the escalating Middle East conflict. Global bond routs pushed sovereign yields higher, with traders flagging weak dema
The Bureau of the Treasury (BTr) made a partial award of reissued 20-year Treasury bonds on Wednesday, borrowing P29.561 billion against a P30-billion target, as yields climbed on broad risk-off sentiment amid the re-escalation of the Middle East conflict. Total tenders reached P36.111 billion, but the government capped the average yield at 7.218% to align the award with market sentiment, it said in a statement after the auction.
The reissued papers, which have a remaining life of four years and 10 months, were awarded at an average rate of 7.218%, with accepted yields from 7.15% to 7.25%. This was 7.9 basis points (bps) higher than the 7.139% fetched at the series’ last award on Aug. 4, and 11 bps above the 7.108% for the same bond series at the secondary market before Wednesday’s auction, based on PHL Bloomberg Valuation Service Reference Rates data provided by the BTr. The yield was also 12.3 bps above the 7.095% quoted for the five-year benchmark tenor closest to the papers’ remaining life.
Demand was weak partly due to the rise in global bond yields after fresh attacks between the United States and Iran, a trader said. Bond rates tracked US Treasury yields higher, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, adding that the Gulf hostilities have pushed up global oil prices and added to domestic inflation pressures, which could lead to further monetary tightening from the Bangko Sentral ng Pilipinas (BSP). The yield on 10-year US Treasury notes rose to a near three-year high of 4.81%, while Japan’s 10-year yield perched above 3%, a 30-year high, and Australia’s 10-year yield hit 5.198%, its highest level in over 15 years.
Global bonds sold off sharply on Wednesday, extending a rout that is raising borrowing costs to multi-decade highs as the Middle East conflict pushes up energy prices, playing into investor fears about inflation and ballooning government debt. The BSP delivered its third straight rate hike at its Aug. 27 meeting, raising the benchmark rate by 25 bps to an over one-year high of 5%, with Governor Eli M. Remolona, Jr. signalling more hikes as needed to steer inflation back to the 3% target.
