Reissued T-bonds command higher yield

MANILA, Philippines — The yield on the 10-year Treasury bond (T-bond) spiked in yesterday’s auction, with the Bureau of the Treasury making a full award of the P35 billion reissued bonds on offer.

The T-bonds fetched an average rate of 5.093 percent, up by 26.2 basis points from the previous average rate of 4.831 percent.

It also exceeded by 11.8 bps the BVAL Reference Rate of 4.975 percent for the tenor.

First issued on Jan. 20, the bonds have a remaining life of nine years and 11 months.

Demand for the long-term securities amounted to P51.077 billion, oversubscribing the program by 1.45 times, but declining by more than 29 percent from the prior auction’s P72.24 billion.

National Treasurer Rosalia de Leon said investors went to the government auction worried that the US Fed may raise interest rates anytime soon. The Fed eyes to increase rates at least thrice this year to tame inflationary pressures.

Based on market estimates, US inflation will rise yet again to 7.3 percent, the fastest in around 40 years since 1982, beating the seven percent print recorded last December.

“Average rate marginally higher than secondary level, as local rates track climb in US Treasury,” De Leon said in a text message to reporters.

“Market remains defensive with anticipated high consumer price index print in January. [It also adds] more pressure for the Fed to act hawkishly,” she added.

On the other hand, inflation in the Philippines eased to three percent in January from 3.2 percent in December, using the rebased figures of the Philippine Statistics Authority. However, risks stay the same, especially now that the economy is moving toward reopening.

The Bangko Sentral ng Pilipinas has also maintained its position to keep interest rates at record lows to accommodate the economy in its recovery phase.