Treasury caps 5-year bond yield
Bureau of the Treasury (From the Facebook account of the bureau)
MANILA, Philippines—The Bureau of Treasury (BTr) on Tuesday (May 10) borrowed P25.1 billion — lower than the amount it intended to raise through reissued five-year bonds, as it capped the yield at 5.772 percent.
Had the BTr borrowed all of the P35 billion it wanted at Tuesday’s auction of bonds maturing in four years and 11 months, the average rate would have climbed to 6 percent.
In the secondary market, the same bond, which was first offered in 2017, was priced at 5.84 percent.
De Leon said the Treasury awarded the IOUs maturing in May 2027 at a lower yield than the secondary market rate “for security.”
Other comparable five-year bonds had an average rate of an even lower 5.584 percent in the secondaries.
“[Bid] rates climbed higher with analysts’ expectations of surging inflation breaching the target band,” De Leon said. Headline inflation hit a 40-month high of 4.9 percent year-on-year in April due to:
- Expensive food and oil
- Bangko Sentral ng Pilipinas (BSP) projection of a rate of increase in prices of basic commodities to average 4.3 percent this year, above the 2 to 4 percent target range of price hikes deemed manageable and conducive to economic growth.
The elevated T-bond bids “also tracked the US Treasuries’ upward movement as the US Federal Reserve maintained a hawkish stance to battle with high inflation,” which had been hitting four-decade highs in the US, De Leon added.
Government securities eligible dealers (GSEDs) were willing to lend the BTr a total of P55.3 billion, making the tenders over 1.5 times bigger than the offering.
To date, this bond series has an outstanding volume amounting to P274 billion, the BTr said in a statement.
