Yield of 5-year T-bonds at 4.625%

The rate on five-year treasury bonds was hardly changed during Tuesday’s auction at 4.625 percent, up 1.5 basis points from 4.61 percent set in the most recent auction of this tenor.

Tuesday’s average was also lower than the corresponding 4.725 percent for done deals in the secondary market.

National Treasurer Roberto B. Tan said in an interview that the results reflected the very liquid condition of the local financial market. The market’s mood was also riding on “positive news about the government’s financial position, with the budget deficit being way below the program,” Tan said.

“The economic fundamentals are also good, with inflation in May being just about the same as the previous month’s and, based on the trend, it looks like such modest inflation will be sustained,” he added.

Last week, the Bureau of the Treasury reported that the budget deficit for the first five months of the year reached P22.79 billion, which was just about a fifth of the P109.34 billion that the government intended to spend on top of national budget for the first semester.

The National Statistics Office also said the growth in consumer prices in May settled at 2.9 percent year on year, bringing the average for January-May to 3 percent.

In Tuesday’s treasury bond auction, investors tendered a total of P28.05 billion, or more than thrice the volume on offer. The Treasury raised P9 billion as planned.

Tuesday’s offer was a fresh issue of five-year bonds that will mature on July 5, 2017.

Tan also said that the Treasury has not yet decided on whether to issue a second batch for this year of retail bonds considering that P58 billion worth of RTBs will mature in August and September.

For the third quarter of 2012, the Treasury plans to issue a total of P108 billion in regular bonds and bills. The amount is lower by 1.4 percent than local IOUs sold in the previous quarter.