Higher rates sought for P15-B treasury bonds

The Bureau of the Treasury rejected all bids for the P15 billion in T-bonds that was offered yesterday as the market demanded elevated rates.

Had the Treasury fully awarded the reissued 20-year IOUs, the annual rate would have jumped by 41.1 basis points to 7.39 percent from 6.979 percent in the previous auction.

The coupon rate for the debt paper first issued in February was 6.5 percent.

Tenders reached P20.556 billion, making the auction oversubscribed.

Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction that the market was “looking for a pay up because next week is going to be the policy meeting of the Monetary Board.”

“It looks like the demand is there in that sector of the curve even if it’s a 20-year [bond], but I think they are looking for really higher rates in this environment,” Sta. Ana said.

On July 20, Bangko Sentral Governor Nestor A. Espenilla Jr. said the policy-making Monetary Board was “considering strong follow-through monetary adjustment.” The Monetary Board will meet to decide on the interest rate policy on Aug. 9.

The BSP already raised the key policy rate to 3.5 percent or by 25 bps each in May and June after headline inflation hit a five-year high of 5.2 percent last month and averaged 4.3 percent in the first half, already above the government’s full-year target range of 2-4 percent.

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