5-year T-bonds fetch higher rates

MANILA, Philippines — The five-year treasury bonds fetched higher rates Tuesday as the Bureau of Treasury (BTr) successfully raised P15 billion.

The yield of the five-year T-bonds due March 2023 averaged 5.902 percent, 31 basis points higher than the previous average of 5.592 percent.

The auction met healthy demand, gathering P24.52 billion in total tenders versus the offer size of P15 billion. The committee made a full award and rejected P9.52 billion worth of bids.

National Treasurer Rosalia de Leon said the auction committee contemplated on capping the rise in yield but decided otherwise.

 “That is just a difference of about four basis points and you just get about some P8.5 to P8.6 billion so half of the amount we offered. So with the four basis points, then we decided to do a full award,” she said.

Since it last accepted the bids for the five-year T-bonds last May, De Leon said the Bangko Sentral ng Pilipinas has raised interest rates by 100 basis points to curb rising inflationary pressures.

The central bank lifted rates by 25 basis points for the first time in more than three years on May 10 followed by another 25 basis points last June 20 and 50 basis points last Aug. 9 to anchor inflationary expectations.

 “Since May, there’s almost a 100 basis points increase in the policy rate. So it is just catching up,” De Leon said.

Economists believe the 100 basis point hike by the BSP is not enough to anchor inflation which is expected to peak sometime in the third quarter.

The consumer price index accelerated to a fresh five-year high of 5.7 percent in July from 5.6 percent in June, bringing the average to 4.5 percent in the first seven months of the year exceeding the BSP’s two to four percent target.

The Monetary Board has adjusted upward its 2018 inflation forecasts to 4.9 percent and 3.7 percent next year.