10-year T-bond rate rises; gov’t hits target

MANILA  -The government was able to raise its planned amount via long-term debt during this month’s sale of Treasury bonds (T-bonds) despite the high rates demanded by creditors who are wary of stubbornly high inflation.

The Bureau of the Treasury was able to borrow the target amount of P30 billion on Tuesday’s auction of reissued T-bonds with a remaining life of nine years and 10 months.

With the latest issuance, the total T-bonds sold in October reached P90 billion, hitting the target for this month’s fundraising program despite high interest rates.

Auction results showed the reissued T-bond fetching an average rate of 6.954 percent, higher than the 6.42 percent seen in the previous sale of 10-year debt paper last Sept. 19.

The yield was also higher than the 6.63 percent quoted for the comparable tenor at the secondary market, based on Bloomberg Valuation Service.

Analysts have said the hawkish stance of the Bangko Sentral ng Pilipinas would likely push rates higher in the coming months amid rising consumer prices. High inflation tends to erode investment returns, prompting investors and creditors to ask for higher yields to shield their money.

But apart from tightening monetary conditions, Michael Ricafort, chief economist at Rizal Banking Corp., said a decline in demand for T-bonds also lifted the average yield during the auction. While the reissued debt securities were oversubscribed by 1.6 times after attracting total bids amounting to P48.9 billion, this was lower compared with P66.719 billion total orders recorded in the Sept.19 issuance.

The government borrows money from creditors at home and abroad to bridge its budget gap, which is capped at 6.1 percent of gross domestic product this year.

For October, the Treasury had raised P141.6 billion from the offering of domestic debt via Treasury bills and bonds, below the planned amount of P150 billion. INQ