Yield on the seven-year treasury bond on Tuesday hit an average of 5.019 percent, 8.3 basis points higher than the 4.936 percent on the recent issue of the same tenor awarded in August.
Also, Tuesday’s average was 6.4 basis points higher than the 5 percent for the corresponding done deals in the secondary market.
The offer was a reissue of the seven-year bonds that were first floated on August 18. The bonds have six years and nine months until maturity.
Investors tendered a total of P17.16 billion, or more than twice the P9 billion on offer, but the Bureau of the Treasury (BTr) gave a partial award of P7.82 billion.
Deputy Treasurer Eduardo S. Mendiola said in an interview the move was meant to help temper the rise in rates.
Had the BTr given a full award, the yield would have risen 9.3 basis points to an average of 5.029 percent.
“We aligned the rates to secondary market rates,” especially to the yield on corresponding done deals, Mendiola said. “We did this by limiting the average to 5.019 percent, which is just a sideways move (or insignificant change).”
Mendiola said the results of Tuesday’s auction reflected “good economic fundamentals, ample liquidity considering that the offer was oversubscribed more than twice.”
Mendiola said investors recognized that the government had a strong cash position, particularly with a 23-percent, year-on-year increase in revenue in January to September.
Last month, financial services firm DBS Group said in a research note that the central bank’s focus on economic growth instead of inflation may push down interest rates on government securities.
DBS said that in such a scenario, monetary policy might encourage ample liquidity in the banking system until growth outlook recovers.
DBS said the shift in the BSPs attention from inflation was shown with its decision not to change its overnight borrowing rate at 4.5 percent.