MANILA, Philippines — Rates for 10-year Treasury bonds nearly hit 7.4 percent yesterday, as investors anticipate an aggressive rate hike from the Bangko Sentral ng Pilipinas (BSP) to tame inflation.
The Bureau of the Treasury yesterday borrowed P34.892 billion of the P35 billion it programmed to raise from the auction of original 10-year T-bonds.
The 10-year T-bonds landed a coupon of 7.25 percent and a rate of 7.145 percent, fetching bids from a low of 6.95 percent to a high of 7.37 percent.
The coupon exceeded by 30.6 basis points the market pricing of 6.944 percent for the tenor, as the rate also went beyond the benchmark level by 20.1 basis points.
Demand for the securities reached a total of P67.294 billion, oversubscribing the offer by almost twice.
National Treasurer Rosalia de Leon said investors asked for additional rates, wary that the BSP may raise rates by up 50 basis points on its Thursday meeting. As such, the Treasury decided to call a partial award and cap the yield for the issuance.
“We made a partial award because we saw a strong volume despite the long maturity, but at a steep price,” de Leon said in a text message to reporters.
“The market provided a cushion against back-to-back rate increases to be delivered by both the US Fed and the BSP in the next policy meetings to slay the ugly head of inflation,” she said.
US inflation surged to a 40-year high of 8.6 percent in May, putting the US Fed in a tight spot as to how it can pace its monetary tightening.
Pressured, the Fed last week raised its interest rate by 75 basis points, the largest since 1994, on top of the 75- basis- point rise in the March and May meetings. The US central bank wants to push its funds rate up to 3.4 percent in 2022 and to 3.8 percent in 2023.
The country’s nationwide inflation ballooned to a 42-month high of 5.4 percent in May as food and fuel costs went up with supply chains interrupted by the war in Europe. The economic team projects inflation to average as high as 4.7 percent for the year.
After delivering an initial rate hike of 25 basis points in May, the BSP intends to go for another one of the same level in its policy meeting on Thursday.