20-year treasury bond yield rises

The rate of the 20-year T-bond sold Tuesday rose to 5.356 percent even as the Bureau of the Treasury expected the easing inflation and recent interest rate and reserve requirement ratio (RRR) cuts by the Bangko Sentral ng Pilipinas (BSP) to pull down debt yields.

The Treasury sold all P20 billion in reissued IOUs maturing on Jan. 24, 2039 while the average annual rate climbed by 34.1 basis points from 5.015 percent previously.

Tenders reached P30.72 billion, making the auction oversubscribed.

“Bids came in higher than secondary market levels even in the last auction. We feel that given the inflation path and the actions from the BSP, the rates should not be heading where it is based on the bids,” Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction.

Headline inflation fell to a 35-month low of 1.7 percent year-on-year in August, bringing the eight-month average to 3 percent—within the government’s 2 to 4 percent target range.

Sta. Ana said debt rates “should not spike that much.”

“Probably there could be some concerns about continuing geopolitical tensions and, of course, the concern on oil prices and the last [US Federal Reserve] meeting wherein there are reports of a hawkish cut by the Fed—possibly, those are considered [by investors] for this auction. Given that, there could be a possibility that dealers would think they cannot park funds in long-tenor securities. But we feel that oil prices are actually not a concern for now as [BSP] Governor [Benjamin E. Diokno] mentioned earlier and you know there is a policy meeting [on Thursday] when there can be a rate cut… we don’t see the oil issue as a catalyst for rising interest rates,” Sta. Ana said.

Asked to comment on the suspension of negotiations for and signing of grants and loans with countries that voted to affirm the United Nations Human Rights Council’s (UNHRC) investigation of alleged human rights abuses in the country, Sta. Ana replied: “We don’t see that as a dent in our funding program. That’s why we’ve been diversifying our sources. We are going to several countries and jurisdictions not affected by the Presidential directive.”