Rates on T-bonds rises on higher inflation

INQUIRER FILE PHOTO

Rising inflation in July drove up yields for Treasury bonds (T-bonds) on Tuesday, albeit, the government successfully met its borrowing target.

Auction results showed that the Bureau of the Treasury made a full award of P30 billion in reissued T-bonds, which have a remaining life of four years and nine months.

The total bids amounted to P73.1 billion, exceeding the size of the original offering by 2.4 times.

READ: July inflation overshot target, surged to 4.4%

The debt paper fetched an average rate of 6.107 percent, higher than the 6.053 comparable five-year debt note issued on July 2. However, it was cheaper than the 6.115 percent quoted for the same tenor in the secondary market.

A bond trader attributed the higher yield due to faster inflation in July.

“We saw decent demand like the recent auctions although this one was awarded close to the higher end of expected range,” the bond trader said.

According to the Philippine Statistics Authority, inflation surged by 4.4 percent year on year in July, accelerating from the 3.7 percent in June, but slower than 4.7 percent in the same period last year.

Meanwhile, another bond trader said that the auction was in line with the market expectations which follow the movement in the secondary market yield.

“Demand for local bonds, particularly in the belly to the long end of the curve, has been robust amid rising expectations that the Bangko Sentral ng Pilipinas (BSP) and the US Fed may ease policy settings soon,” the bond trader said.

However, BSP Governor Eli Remolona Jr. on Tuesday hinted that a rate cut in August is “a little less likely” amid accelerating inflation in July.