Investors flocked to Tuesday’s treasury bonds auction and snapped up the seven-year IOUs, taking advantage of the yield before interest rates fall alongside easing inflation.
The Bureau of the Treasury sold all P20 billion in T-bonds it offered at a rate of 6.25 percent.
The new T-bond series fetched a rate lower than the average coupon of 7.09 percent for a seven-year debt paper issued last year, National Treasurer Rosalia V. de Leon told reporters after the auction.
Tenders totaled P66.9 billion, making the auction over three times oversubscribed.
“We still see very strong liquidity,” De Leon said.
As such, the Treasury opened the tap facility to sell an additional P10 billion to the 10 so-called “market makers” among government securities eligible dealers (GSEDs).
According to De Leon, the market was “taking advantage of the rates right now because they see that rates will eventually taper down given that they would expect inflation to really go on a downtrend, to decline significantly.”
De Leon noted that the Bangko Sentral ng Pilipinas (BSP) had assured the public that inflation would return to the 2-4 percent target band this year.
Headline inflation or the rate of increase in prices of basic commodities hit a 10-year high of 5.2 percent in 2018 due to higher excise taxes, elevated global oil prices, as well as food supply shortage, especially of rice.
As such, the BSP last year hiked key interest rates by a total of 175 basis points, making it more expensive to borrow.