The yield on the 25-year treasury bonds on Tuesday slid further to 6.656 percent, 47.5 basis points lower than the previous 7.131 percent for the most recent issue of the same tenor.
Also, Tuesday’s yield for the issue was 16.9 basis points lower than the 6.825 percent prevailing for done deals in the secondary market at the time of the auction.
Investors tendered a total of P32.53 billion, or almost four times the volume on offer. The Bureau of Treasury raised P9 billion as planned.
National Treasurer Roberto B. Tan said in an interview that the auction results showed “the very liquid condition” of the domestic financial market.
“We’ve seen that there is demand for long-term government securities because of that,” Tan said. “This liquidity is a result of the [recently held] bond exchange and the government’s program for long-term issues.”
Tan said a further easing of interest rates might be possible depending on the economic data for the remaining three months of the year.
Tan also noted that reported inflationary expectations “will be manageable” as the National Statistics Office said the rate of increase in prices of consumer goods settled at 4.8 percent year on year in November, bringing year-to-date average inflation to the same level.
Last week, Singapore-based DBS Group said Philippine inflation was seen to weaken steadily over the next three months from a peak in October.
DBS said that because of this, it expected the Bangko Sentral ng Pilipinas to reduce its policy rates by 25 basis points by the end of the first quarter of 2012 before holding it constant for the rest of the year.
This would bring the BSP’s overnight borrowing rate to 4.25 percent.
“Inflation should have already peaked at 5.2 percent in October and should start trending lower toward 4 percent by February next year, food price pressures from crop damage notwithstanding,” DBS said.
“With inflation unlikely to pose a threat just yet, growth concerns will dominate,” it added.