7-year T-bond rate falls to 3.875%
Philippine Daily Inquirer
The rate for the seven-year treasury bonds fell to a new record low of 3.875 percent in the auction held Tuesday as demand for the virtually risk-free debt instruments significantly surpassed supply.
The latest rate for the bonds was down 87.5 basis points from the previously registered rate of 4.75 percent.
“There is sufficient liquidity in the market and there is appetite [for government securities] given the country’ strong fundamentals and significant improvement in the government’s fiscal condition,” National Treasurer Rosalia de Leon said in a press briefing after the auction.
She said the excess liquidity in the market and confidence in the government’s ability to meet its financial obligations fueled demand for the debt paper. Tenders for the seven-year bonds amounted to P35.43 billion, almost four times the government’s borrowing schedule of P9 billion.
Liquidity in the market is partly attributed to the inflow of foreign portfolio investments. Given the unfavorable economic performance of the United States and the eurozone, some portfolio investors are shifting their investments to emerging market assets such as peso-denominated government securities.
Governor Amando Tetangco Jr. of the Bankgo Sentral ng Pilipinas earlier said that foreign portfolio investments were influenced both by push and pull factors. He said the Philippines’ favorable economic fundamentals “pull” foreign portfolio investments to the country while problems confronting advanced economies “push” investments to emerging markets like the Philippines.
Meantime, De Leon said the treasury bureau would consider making the “onshore dollar bond sale” program of the government a regular activity should the first auction scheduled on November 28 gather significant interest from the market. Under the program, the government will sell dollar-denominated bonds within the country.
Officials said there was no need to borrow dollars from abroad since local banks have plenty of dollars in their vaults.
The strong inflow of dollars into the country has been blamed for the significant appreciation of the peso so far this year. The local currency has appreciated by at least 6 percent since the start of the year, now hovering in the 41-to-a-dollar territory from 43 at the start of the year.—Michelle V. Remo