Treasury bond rate rises

The yield on five-year treasury bonds increased by 51.8 basis points to 3.52 percent in Tuesday’s auction.

The Bureau of the Treasury said, however, that the rate increase was “tolerable” as the average rate came in below secondary market benchmarks.

There was sizeable demand for the government security, although investors sought a higher risk premium considering the volatility in global financial markets.

Tenders amounted to P39.95 billion, exceeding the government’s debt offering of P25 billion.

The auction committee accepted P25 billion worth of bids.

The increase in interest rates for government securities across tenors so far this year has come amid tapering of the stimulus program in the United States.

The US Federal Reserve has so far cut the value of its monthly bond purchases from $85 billion to $65 billion following the improvement in the US economy.

The US Fed is expected to continue tapering throughout the year as the US economy continues to gain strength.

Consequently, demand for portfolio instruments has shifted in favor of dollar-denominated assets, pushing up interest rates on emerging-market securities.

Meantime, Finance Secretary Cesar Purisima said the Philippines, given its “sound” macroeconomic fundamentals, should not suffer from the adverse effects of external developments.

He said the Philippines, compared with a number of emerging markets, has a healthier fiscal situation, more comfortable foreign-exchange liquidity, and more robust economic growth.

The Philippines last year grew by 7.2 percent, estimated to be the second-fastest expansion rate in Asia next to China.

“What’s happening is that the Philippines is being lumped together with other emerging markets by [portfolio] investors. This should not be the case because we have strong fundamentals,” Purisima told reporters Tuesday on the sidelines of an economic forum organized by Euromoney.

He said the Philippines ought to communicate more clearly the favorable fundamentals of the domestic economy so that valuation of Philippine portfolio assets would not be based on the performance of other emerging markets.   Michelle V. Remo

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