Reissued 7-year T-bonds fetch higher rate

MANILA, Philippines — Yields of reissued seven-year Treasury bonds (T-bonds) rose significantly as the market demanded higher rates to keep up with rising inflation and the uptrend in US Treasury rates.

During yesterday’s auction, the Bureau of the Treasury (BTr) awarded in full P30 billion worth of the debt papers with a remaining term of six years and one month at an average rate of 3. 732 percent, around 100 basis points higher than the average 2.719 percent yield when its was last offered in January.

The issue was 1.7 times oversubscribed with total tenders reaching P50.248 billion.

Demand, however, was weaker compared to total tenders of P82.587 billion in January.

National Treasurer Rosalia de Leon said the higher yields tracked the rise in inflation to a new two-year high of 4.7 percent in February as prices of meat continued to rise and oil prices normalize coming from last year’s lows.

Yields of US Treasuries also continued the uptrend as the market remains highly optimistic about the US COVID-19 stimulus package.

“(Higher) rates expected as secondary levels climbed in tandem with inflation, higher oil prices and US treasuries— with optimism on stimulus package,” De Leon told reporters.

With weaker demand for the securities, the BTr will not open the tap facility that allows government securities eligible dealers to access securities after the initial primary auction.

This was echoed by a bond trader who cited that the rise in rates was “in line with market expectation because of inflation and the magnitude of increase in US Treasuries.”

BTr wants to raise P160 billion from the local bond market this month even with rising rates to take advantage of ample liquidity in the market.

Another trader said that in the near term, market appetite will continue to be concentrated on short-term securities while uncertainties remain.