MANILA, Philippines — Reissued 10-year Treasury bonds (T-bonds) yesterday fetched higher rates amid expectations of an elevated inflation figure in January, the Bureau of the Treasury (BTr) said.
The BTr fully awarded P30 billion worth of securities maturing in nine years and five months at an average rate of 3.066 percent, 34.2 basis points higher as compared to the 2.724 percent recorded in the previous auction for the same securities in Aug. 11 last year.
The auction was more than two times oversubscribed, with total tenders amounting to P63.045 billion.
Despite the uptick in rates, the BTr said the average rate fetched by the securities was within market expectations.
“The rates were compared to the previous auction. But BVAL for the security is higher at 2.968 percent, given inflation reading for January and expectation this year,” National Treasurer Rosalia de Leon said.
Moreover, she said there was strong participation from the market despite the relatively low pick-up in yields.
Sought for comment, a bond trader said there was ample demand from the market despite the expected acceleration in inflation for January due to the robust liquidity in the financial system.
The Bangko Sentral ng Pilipinas (BSP) said earlier inflation in January likely settled at 3.7 percent due to higher prices of fuel, power, meat, and “sin” products, namely alcoholic beverages and tobacco products. This would be faster than the 3.5 percent print recorded in December and the 2.9 percent posted in January 2020.
Going forward, De Leon said securities with longer maturities may continue to see an increase in rates, the opposite of the projected trend for those with shorter tenors.
“Some upward adjustments in the long end, but front end will remain (low) with abundant liquidity and heavy bias on this segment,” she said.
A bond trader also said the rise in rates may continue due to the probability of the BTr issuing retail T-bonds, as well as the elevated inflation environment.
The government is programmed to borrow P3.03 trillion this year from domestic and external sources to bridge the deficit in its budget, which is expected to widen to 8.9 percent of gross domestic product.
For February, the BTr is targeting to raise P140 billion from domestic issuances.
Given its ramped up borrowing activities, the country’s outstanding debt is seen to hit P11.98 trillion by the end of the year, translating to a debt-to-GDP ratio of 58.1 percent.