Reissued T-bonds fetch higher rates

MANILA, Philippines — Reissued seven-year Treasury bonds (T-bonds) yesterday fetched higher rates despite a partial award, as investors continued to consider the possible inflationary impact of the Taal Volcano’s eruption, the Bureau of the Treasury (BTr) said yesterday.

Securities with a remaining lifespan of six years and one month secured an average interest rate of 4.732 percent after the auction committee yesterday decided to cap the accepted rates at 4.75 percent.

Despite this, the average yield still rose by 41 basis points as compared to the 4.322 percent recorded in the previous auction for the same debt papers in Oct. 29 last year.

Healthy demand met the P30 billion offering, with P52.71 billion in total tenders, but only P27.203 billion was awarded.

In an interview, National deputy treasurer Erwin Sta. Ana said the auction committee decided to award the bonds at 4.732 percent, as it is close to the rates of seven-year papers in the secondary market. Seven-year securities were trading at 4.67 percent as of yesterday before the auction closed.

“The approach of the auction committee was to award at a rate that is close to where the security is in the secondary market. In the morning session, we observed that the security was trading at 4.7 percent,” Sta. Ana said.

The BTr official said rates for the bonds went up, as investors priced in the uncertainties caused by the ongoing Taal Volcano eruption and as well as geopolitical tensions overseas.

“We have observed that over the past couple of weeks, there has been an uptick in interest rates, and basically these are brought about by inflationary pressures,” Sta. Ana said. “The market may be pricing the inflationary impact of the Taal Volcano eruption.”

“Of course there’s always that risk on oil, although now it has a little bit stabilized. So it’s really more of the inflationary environment, we feel that led to these levels,” he added.

Earlier, National Treasurer Rosalia De Leon echoed the statements of Socioeconomic Planning Secretary Ernesto Pernia and Finance Secretary Carlos Dominguez, who both said that the volcanic eruption may not have a significant impact on inflation.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno likewise said the calamity may not cause a significant spike in consumer prices nor cause a huge dent on the country’s economic growth.