The yield on five-year treasury bonds eased Tuesday to 4.125 percent a year, down by 50 basis points from the 4.625 percent set in July during the previous auction of this tenor.
Deputy Treasurer Eduardo S. Mendiola said in an interview the result showed that there is so much liquidity in the domestic financial system, although it is not coming from maturities of government securities.
Mendiola said the government needed to redeem P1 billion worth of securities this week.
“Of course, there is also the market opinion that given the macroeconomic variables, such as inflation going down and upgrades from credit rating agencies, (it is encouraging) to invest in government paper as shown by the high volume of tenders,” he added.
Investors tendered a total of P47.645 billion or more than five times the volume on offer.
The Bureau of Treasury raised P9 billion as planned.
“Given also the trend of a declining rate, many are interested to lock in to longer-tenor government securities,” Mendiola said.
Asked whether the BTr would award more of the new issue through over-the-counter deals, he said “it would be foolhardy” to do so given that “the government has so much cash.”
“The only reason why we continue with the regular program is that this borrowing program has already been input in the plans of dealers and banks,” Mendiola said.
He added that the latest development could mean a reduction in the borrowing plans for next year.
“We still have to see the configuration of the budget for next year, but we’ll probably be reducing the auction size for both T-bill and T-bonds,” he said.
Tuesday’s offer was a fresh issue of five-years that would mature on Nov. 8, 2017.
Also, Mendiola said the BTr would push ahead with a planned bond exchange in December.
Considering Tuesday’s result, he said a new issue would be a good issue.
“(The rate would go down), and then we can probably retire a lot of the high-coupon (outstanding) issues,” Mendiola added.