T-bond yield up 144.8 bps
MANILA, Philippines—Yield on the 10-year treasury bond on Tuesday rose by 144.8 basis points to an average of 7.367 percent as upward pressure on interest rates, mainly due to inflation, set in.
As a result, the Bureau of the Treasury (BTr) raised only P5.4 billion instead of the planned P9 billion.
Had the BTr awarded fully the volume on offer worth P9 billion, the yield would have gone up by 149.5 basis points to an average of 7.414 percent.
Tuesday’s auction covered the second re-issue of 10-year treasury bonds that were first auctioned off in September last year, when it fetched a coupon of 6.125 percent.
Investors tendered a total of P18.75 billion, or more than twice the volume on offer.
In an interview, National Treasurer Roberto B. Tan said the resulting rate was lower than the 7.375 percent that prevailed in the secondary market.
“We just wanted to provide new supply (of this tenor),” Tan said. “But the 10-year T-bond is already liquid with P23 billion raised previously.”
Tuesday’s auction results seemed to fulfill a forecast by Singapore-based DBS Bank, which said in a recent report that yields on Philippine government debt paper are expected to rise although moderately in the second quarter amid rising inflation.
DBS said in its latest report on the Asian markets that, in particular, yield on the 10-year treasury bond is likely to rise to 8 percent.
DBS said there was “clearly more concern” about the inflation outlook after inflation jumped in February to a nine-month high of 4.3 percent year-on-year.
The bank noted that yields on the 10-year bond remain well below the 10-year average of 10.4 percent.
“This suggests a demand premium and means that longer-term bond yields are vulnerable in an environment of less favorable liquidity conditions,” DBS said.
A separate report by Capital Markets Research Center (CMRC)—a joint unit of First Metro Investment Corp. and the University of Asia and the Pacific—said upward pressure on yields would continue as inflation quickens and inflationary expectations continue to build up.
