Amid inflation surprise, war jitters in Middle East investors’ cautious mood mirrored in bond auction

Higher inflation last December and increasing tension between the US and Iran pushed investors to the sidelines, putting a damp on sale of treasury bonds to just more than half of what was offered.

The Treasury awarded P16.6 billion out of the P30-billion offering for reissued three-year bonds maturing on July 4, 2022.

The annual rate was capped at an average of 4.014 percent as bid rates reached a high of 4.05 percent and a low of 3.985 percent.

Tenders nonetheless reached P37.35 billion, making the auction oversubscribed.

To date, the Treasury sold P103.63 billion of this bond series.

Deputy Treasurer Erwin D. Sta. Ana told reporters after the auction that the market was reacting to news that headline inflation picked up to 2.5 percent year-on-year in December on top of war jitters in the Middle East.

“We feel that the market is on wait-and-see at this time, hence the turnout this afternoon,” Sta. Ana said.

He said the market was still digesting the higher-than-expected December inflation and took a step back in bidding aggressively.

Sta. Ana said tensions in the Middle East and elsewhere had historically resulted in a wait-and-see attitude among investors on government securities, especially if oil supply and prices were to feel the impact.

At last Monday’s T-bill auction, the Treasury also partially awarded short-dated securities as rates of 182 and 364-day debt papers rose.

Edited by TSB