7-year treasury bond rate falls as inflows start to pick up

Yield on the seven-year Treasury bond fell Tuesday to an average of 4.808 percent—21.1 basis points lower than that of a float of the same tenor awarded in November.

Tuesday’s average was also 4.5 basis points lower than the 4.8125 percent for the corresponding deals in the secondary market.

The offer was a reissue of seven-year bonds that were first floated on August 18 last year.

This means that the bonds will mature in six years and seven months.

Investors tendered a total of P31.205 billion, more than thrice the volume on offer. The Bureau of the Treasury (BTr) raised P9 billion as planned.

National Treasurer Roberto B. Tan said in an interview that the auction results were “very much within the secondary market range” and was a welcome development especially at the start of the year.

“There are a lot of cash available,” Tan said. “I guess, at the end of the year, many investors liquidated their assets into cash.”

He cited market reports that “foreign money inflows have started to come back” into the local equities market.

Also, “inflation levels have been within target,” Tan said. “I think it averaged at 4.46 percent for the year (2011).”

Asked about the outlook for government borrowings in 2012, Tan said “there may not be any major difficulty, except maybe a surge in oil prices because of tension (in the Middle East). But I think that would be temporary.”

The treasury chief said “a major portion” of this year’s borrowings will come from domestic sources, considering that “there is a lot of liquidity, and this will remain to be so in the foreseeable future.”

Tan said special depository accounts parked with the central bank amount to P1.66 trillion, proving that domestic market could provide the funds the government would need.—Ronnel W. Domingo