Concerns over rising prices jack up T-bond rates
Concerns over lingering elevated inflation jacked up bid rates for reissued seven-year bonds Tuesday even as the Bureau of the Treasury raised all P35 billion it offered amid strong demand.
The average annual rate for the treasury bonds maturing in April 2028 rose to 3.678 percent from the 3.625-percent coupon when these IOUs were first sold last month.
“Markets are still pricing inflation risk,” National Treasurer Rosalia de Leon said after the auction.
Headline inflation averaged 4.5 percent year-on-year as of end-April, above the government’s 2 percent to 4 percent target range.
While the Bangko Sentral ng Pilipinas expects the rate of increase in prices of basic commodities to end the year within target at 3.9 percent, some private economists said high inflation would persist in the near term.
“Headline inflation is forecast to peak in mid-2021 and then ease off thereafter, helped by base effects,” think tank Moody’s Analytics said in a May 14 report.
“Soft demand-driven price increases will be countered by higher commodity prices and still build inflation pressures. On net, however, we expect that underlying inflation will remain subdued in the Philippines and across most parts of Asia this year, reflecting the stubborn spare capacity existing in most economies given their nascent economic recoveries,” Moody’s Analytics said.
Tuesday’s auction was nonetheless met with robust investor demand as tenders reached P84.3 billion, making it more than two times oversubscribed.
De Leon said the Treasury opened its tap facility window to sell another P10 billion of the bonds with a remaining term of six years and 11 months before maturity.
To date, this bond series has an outstanding volume of P95 billion.
Last Monday, the Treasury also sold an additional P5 billion in 364-day T-bills to the 11 government securities eligible dealers-market makers via tap.
It earlier awarded P25 billion in treasury bills across three tenors as yields for short-dated debt fell across the board. INQ
