Treasury raises P35 billion via dual-tenor bonds

THE GOVERNMENT fully awarded the dual-tenor Treasury bonds (T-bonds) it offered on Tuesday as the issues fetched mixed yields, with escalating tensions between the United States and Iran reducing appetite for longer-dated securities.

The Bureau of the Treasury (BTr) raised a combined P35 billion via its dual-tranche T-bond offer, within its goal to raise up to P40 billion through the auction, as total bids for both tenors reached P66.717 billion.

Broken down, the Treasury borrowed the programmed P25 billion via the reissued seven-year bonds, with total bids reaching P46.256 billion, almost double the amount on offer.

This brought the total outstanding volume for the bond series to P365.6 billion.

The bonds, which have a remaining life of two years and five months, were awarded at an average rate of 5.296%. Accepted yields ranged from 5.265% to 5.308%.

The average rate of the reissued papers was down by 2.8 basis points (bps) from the 5.324% fetched for the series’ last award on Jan. 27, but was 154.6 bps above the 3.75% coupon for the issue.

This also matched the yield fetched for the same bond series at the secondary market before Tuesday’s auction but was 5.5 bps lower than the 5.351% quoted for the three-year bond, the benchmark tenor closest to the remaining life of the issue, based on PHP Bloomberg Valuation Service (BVAL) Reference Rates data provided by the BTr.

Meanwhile, the government raised P10 billion as planned from the reissued 25-year T-bonds it auctioned off as total bids for the tenor reached P20.191 billion.

This brought the outstanding volume for the series to P115.1 billion.

The notes, which have a remaining life of 23 years and 11 months, were awarded at an average rate of 6.577%. Accepted yields ranged from 6.5% to 6.6%.

The average rate of the issue rose by 6.7 bps from the 6.51% fetched for the series’ last award on Oct. 21, 2025 and was also 20.2 bps above its 6.375% coupon.

This was likewise 7.7 bps higher than the 6.5% seen for the same bond series but 0.5 bp below the 6.582% quoted for the 25-year bond at the secondary market before Tuesday’s auction, PHP BVAL Reference Rates data showed.

The 25-year bonds fetched higher yields as players are hesitant about locking in their cash in longer tenors due to growing tensions between the US and Iran, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Iran and the US will hold a third round of nuclear talks on Thursday in Geneva, Oman’s Foreign Minister Badr Albusaidi said on Sunday, Reuters reported.

The United States wants Iran to give up its nuclear program, but Iran has adamantly refused, and denied it is trying to develop an atomic weapon.

The State Department is pulling out non-essential government personnel and their families from the US embassy in Beirut, a senior State Department official said on Monday, amid growing concerns about the risk of a military conflict with Iran. US President Donald J. Trump said in a social media post on Monday that it would be a “very bad day” for Iran if it does not make a deal.

“The BTr did not award up to P40 billion, which means they are not looking aggressive in awarding bids, especially with the recent successful benchmark issuance and rate cut,” a trader said in a text message.

The government raised a total of P297.94 billion from its offering of new 10-year fixed-rate Treasury notes (FXTN), made up of P235 billion in new money and P62.94 billion via the switch program, the BTr said on Friday. This was well above the initial P30-billion offer. The benchmark bonds fetched a coupon rate of 5.925%.

Meanwhile, the BSP’s policy-setting Monetary Board lowered benchmark interest rates by 25 bps for a sixth straight meeting to bring the policy rate to 4.25%. This brought total reductions since August 2024 to 225 bps.

BSP Governor Eli M. Remolona, Jr. said future easing will largely depend on how soon confidence will recover, as weak sentiment has affected demand, making the output gap bigger.

On Friday, he said that with inflation under control, they have room to help stimulate domestic demand, although they face a “large element of uncertainty.”

Tuesday’s auction was the last for the month. The government raised P553.24 billion from the domestic market in February, above the P308-billion plan, as it increased its awards at all its Treasury bill (T-bill) auctions and with the new FXTNs leading to above-program bond issuances.

For March, the BTr is targeting to raise P248 billion from the domestic market, or P108 billion in T-bills and P140 billion in T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.647 trillion or 5.3% of gross domestic product this year. — Aaron Michael C. Sy with Reuters