7-yr T-bonds fetch lower rate of 7.272%

Rate for the seven-year Treasury bonds (T-bonds) declined to 7.272 percent, 110. 3 basis points lower than the 8.375 percent coupon rate of a similar paper issued in May.

Yesterday’s auction saw for the first time a significant decline in rates in government debt papers since the start of the year.

The government accepted P7 billion worth of bids as total tenders reached P16.594 billion.

Finance Undersecretary and National Treasurer Roberto Tan attributed the decline in rates to banks’ strong liquidity position and to improving investor sentiment in the country.

“Banks are awash with cash. They do not know where to park their money. The market is improving because there is liquidity,” Tan told reporters yesterday.

He said that investor sentiment has significantly improved after monetary authorities said inflation is likely to ease in the coming months. Global prices of oil and food have improved significantly, Tan said.

“There are more positive news coming out not only in the domestic market but also internationally particularly on commodity prices,” he said.

In the previous months, banks have been seeking higher premiums for government debt papers due to skyrocketing inflation. The auction committee had rejected bids in the previous auctions due to banks’ higher-than-expected offers.

Tan said when inflation goes down, rates will also decline. As such, banks are making the most of the situation by looking for facilities to park their funds while the rates are still relatively competitive.

Inflation rose to 12.2 percent in July, up from 11.4 percent in June, the highest in 17 years amid the rise in prices of basic commodities. July’s rate was above the 11.2 percent to 12 percent forecast of the central bank and “was the highest since December 1991” when the rate topped 13.2 percent, the National Statistics Office (NSO) said.

Data showed that inflation for food, beverage and tobacco rose to 17.8 percent in July from 16.5 percent in June, while the figure for clothing rose to 4.5 percent from 4.2 percent, it said.

The overall annual inflation rate for food alone further climbed to 18.6 percent in July from 17.4 percent in June, the NSO said.  — Iris Gonzales