Government papers still on investors’ radar

Despite new interest rate corridor

MANILA, Philippines – Government securities will remain attractive to investors despite the central bank offering another investment outlet through the interest rate corridor (IRC) by next month, officials and analysts said.

“There will always be appetite...In a way, they will even be complementary,” National Treasurer Roberto Tan told reporters yesterday.

Last Monday, the Bangko Sentral ng Pilipinas (BSP) announced it will push through with the implementation of the corridor to improve monetary policy on June 3.

With the availability of more investment avenues, Tan expressed confidence there will be enough demand for Treasury bonds and Treasury bills to push down interest rates for government financing needs.

The government borrows form local and foreign markets to finance its budget deficit and pay existing debts. T-bonds and T-bills are issued locally to do that.

“For one, the IRC will have a different tenor to our T-bonds and T-bills. IRC is more short-term in nature or at the short end of the curve,” Tan said.

“We have different tenors. For the longer tenors, government securities will have that,” he added.

T-bills maturities are at three months, six months and one year, while T-bonds may range from two to 25 years.

Sought for comment, a bond trader at a local bank agreed. “They are not going to compete each other because they also have a different market.”

“Treasury issues bonds which are non-negotiable and for all local investors. The IRC is more concerned about the banks’ liquidity management,” she added.

At yesterday’s auction, Treasury awarded P25 billion worth of five-year T-bonds at 3.246 percent, down 40 basis points from its last auction last Feb. 16.

Tenders reached nearly four times the offer at P72.56 billion. The government awarded as planned.