7-year treasury bond yield hits 4.75% in gov’t auction

The coupon on the seven-year treasury bonds on Tuesday settled at 4.75 percent, down 25 basis points from the 5 percent set for the previous issue of the same tenor that was awarded last April.

Tuesday’s coupon rate was also 2.55 basis points higher than the 4.7245 percent for the corresponding done deals in the secondary market.

The offer is a fresh issue and will mature on July 19, 2019. Investors tendered a total of P20.95 billion, or more than twice the P9 billion available.

Finance Undersecretary Gil S. Beltran, who chaired the auction committee in lieu of National Treasurer Roberto B. Tan, said in an interview that the results were within the range that was acceptable when compared with secondary market rates.

Describing investor interest that the offer generated Tuesday, Beltran said this was influenced by stable fiscal indicators.

“Government finances are very stable, particularly with the budget deficit being lower than programmed,” he said.

Documents from the Bureau of the Treasury showed that the national government posted a budget deficit of P22.79 billion in the five months to May, 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 debt ratio is going down and our economy is going up,” Beltran added. “Inflation went down and our sovereign credit rating got an upgrade—all these are contributing to very stable interest rates.”

Earlier, Budget Secretary Florencio B. Abad said that for 2013, the government has set a target of bringing down the debt stock to 49.5 percent of gross domestic product from 52.4 percent in 2010.

The government’s total outstanding debt reached P5.15 trillion as of May, increasing from the April level mainly due to a weaker peso and a net issuance of domestic securities.

The National Statistics Office said the rate of increase in consumer prices also eased to 2.8 percent year on year in June from 2.9 percent in May.

Earlier this month, the international credit-rating agency Standard and Poor’s raised the Philippines’ rating to a notch below investment grade mainly due to the government’s stronger financial position.