7-year treasury bond yield declines

Yield on the seven-year treasury bond on Tuesday fell to an average of 4.504 percent, or 30.4 basis points lower than the 4.808 percent for the most recent float of the same tenor which was awarded in January.

Tuesday’s average was also 9.6 basis points lower than the 4.6 percent for the corresponding done deals in the secondary market.

The offer was a reissue of seven-year bonds that were floated on Aug. 18, 2011, which means the bonds have six years and six months until maturity.

Investors tendered a total of P32.727 billion or 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 the auction result showed that investors continued to prefer long-term debt paper.

“Even the seven-year bond has become as popular as the 10-year and 20-year bonds,” Tan said.

Asked whether it made business sense to buy the seven-year bond when the yield was falling, he said Tuesday’s resulting yields “must be the right rates (because that is what) they offered.”

This develops as yields for short-term government securities are rising amid a market correction that has been unfolding in the past weeks.

During the BTr’s last auction for treasury bills held on Feb. 6, the yield on the benchmark 91-day T-bill rose by 9.4 basis points to an average of 1.768 percent.

Back then, Tan said the government was allowing further correction to help bring primary market rates closer to those prevailing at the secondary market.

Also on Tuesday, Tan said the BTr will come up on Thursday with the terms for the planned offering of new retail T-bonds.

Last week, Deputy Treasurer Eduardo S. Mendiola said the BTr would issue on Feb. 21 a minimum of P20 billion each of 15-year and 20-year RTBs, which will then be offered to the public until Feb. 28.

Mendiola added that nine banks were given the mandate to handle the float, including First Metro Investment Corp, Metropolitan Bank & Trust Co., BDO Capital, BPI Capital, Landbank of the Philippines, Development Bank of the Philippines, Philippine National Bank, China Banking Corp. and Deutsche Bank.