“The auction was met with strong demand,” the Bureau of the Treasury said in a statement. It did not say what accounted for what it characterized was a “slight” increase in rates.
MANILA, Philippines – Treasury bond yields rose at yesterday’s auction due to strong demand from investors.
Reissued seven-year T-bonds, with a remaining life of six years and eight months, fetched an average rate of 3.186 percent, up 17 basis points from the previous offer last month.
The issuance, however, was still swamped with P55.44 billion in tenders, more than twice the offer volume of P25-billion. Despite higher rates, the government awarded as planned.
“The auction was met with strong demand,” the Bureau of the Treasury said in a statement. It did not say what accounted for what it characterized was a “slight” increase in rates.
But a bond trader from a local bank said the yield increase was “expected” given that investors are anticipating more supply of securities in the coming months.
“It was still within expectations and that the movement in the rates was basically because of investors seeing more supply of securities,” she said in a phone interview.
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Another trader said this could be due to wider deficit of three percent of gross domestic product (GDP) proposed under the P3.35-trillion outlay of the Duterte administration next year.
“More supply of securities means lower price and in the bond market, the price of the bond moves inversely with the yield,” the second trader said, without citing data.
The government plans to borrow P631.3 billion next year, down from the P695.4 billion target for this year.
At the same time, the National Government debt is seen to decline to 40.9 percent of GDP from 44 percent last year.
