Treasury fully awards T-bonds after dovish signals from BSP

By Aaron Michael C. Sy, Reporter

THE GOVERNMENT fully awarded the Treasury bonds (T-bonds) it offered on Tuesday, locking in a lower average yield after dovish signals from the Bangko Sentral ng Pilipinas (BSP) following weaker-than-expected economic growth in 2025.

The Bureau of the Treasury (BTr) raised the planned P30 billion through reissued seven-year bonds, drawing total bids of P164.8 billion — more than five times the amount on offer.

The strong demand allowed the Treasury to fully award the debt paper, pushing the outstanding volume of the series to P165 billion, it said in a statement.

The bonds, which have a remaining maturity of four years and 11 months, were awarded at an average yield of 5.557%, with accepted bids at 5.52% to 5.563%. The rate was lower than comparable secondary market levels, supporting the Treasury’s decision to fully award the offer.

Buoyed by the oversubscription, the BTr also opened its tap facility, raising an additional P20 billion through the same seven-year bonds at the same average rate.

The auction result marked a sharp drop from previous levels. The average yield declined by 15.3 basis points (bps) from 5.71% during the series’ last award on Jan. 13. It was also 56.8 bps below the bond’s coupon rate of 6.125%.

Secondary market comparisons showed similar strength. The average yield was 1.9 bps below the 5.576% quoted for the same bond series and 7.7 bps lower than the 5.634% rate for the three-year benchmark, the tenor closest to the bond’s remaining life, based on Bloomberg valuation data cited by the Treasury.

A trader said the auction yield came in at the lower end of market expectations, as demand remained strong following Monday’s Treasury bill sale.

Investors were positioning ahead of a large maturity next week, prompting reinvestment demand from players seeking to roll over funds.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the lower yield reflected a broader decline in secondary market rates after the BSP signaled openness to further easing amid slower growth.

Economic data released last week showed gross domestic product growth slowed to 3% in the fourth quarter of 2025, down from 5.3% a year earlier and 3.9% in the previous quarter. Full-year growth averaged 4.4%, falling short of the government’s 5.5% to 6.5% target.

BSP Governor Eli M. Remolona, Jr. said on Sunday the Monetary Board could cut rates by 25 bps at its Feb. 19 meeting if the fourth-quarter slowdown is confirmed to be driven by weak demand.

“If we can help on the demand side and still keep inflation low, then of course we’ll help,” he told reporters in Dumaguete City. He added that policymakers are still assessing whether the slowdown was caused by softer demand or supply-side factors.

The central bank has reduced benchmark interest rates by 200 bps since it began its easing cycle in August 2024, bringing the policy rate to 4.5%.

For February, the government plans to raise P308 billion from the domestic market — P108 billion from Treasury bills and as much as P200 billion from Treasury bonds.

Borrowing from both local and foreign sources helps finance the national budget deficit, capped at P1.647 trillion, or 5.3% of gross domestic product, for the year.