MANILA, Philippines - The government successfully sold P9 billion worth of 10-year Treasury bonds (T-bonds) in an auction on the back of strong investor appetite for the debt paper.
The average rate hit 6.436 percent as bids ranged from 6.3 percent to 6.5 percent or a decline of 6.4 basis points.
Investors tendered a total of P21.246 billion or more than double the programmed debt sale of P9 billion.
Deputy Treasurer Eduardo Mendiola, who chaired yesterday’s auction, said that there’s a lot of liquidity in the market.
“The interest rate is within secondary market rates,” Mendiola said. He said results of yesterday’s auction may be attributed to the decision of the Bangko Sentral ng Pilipinas (BSP) to keep interest rates steady.
“We can relate this to the BSP action of not raising rates. Interest rates would have followed or increased had the BSP raised it,” he told reporters.
Last week, the BSP held interest rates steady, saying that it had room to pause after raising rates in past two meetings.
At the same time, the BSP raised banks’ regular reserve requirements by one percentage point, putting total reserve requirements to 20 percent as a preemptive means to counter liquidity pressures.
As such, the BSP kept overnight borrowing rate at 4.5 percent and the overnight lending rate at 6.5 percent.
Monetary authorities said easing inflation gave them room to pause after two consecutive rate hikes.
Headline inflation in May was 4.5 percent, higher than the revised 4.3 percent inflation rate in April but below market expectations.
The P9 billion-debt sale yesterday was part of the planned borrowing program for the second quarter of the year of P117 billion.
Under the program, the Treasury increased anew the size of its T-bill auctions to P9 billion from P8.5 billion previously. Of the amount, the government is selling P1.5 billion worth of the 91-day paper, P3.5 billion for the 182-day paper and P4 billion for the one-year debt.
For T-bonds, the Treasury maintained the auction size at P9 billion, similar to the previous quarter. Furthermore, the Treasury is selling four, seven and 10- year debt papers.
This year, the government is eyeing to contain the budget deficit at roughly P290 billion this year or 3.2 percent of total economic output.
By Iris C. Gonzales, The Philippine Star
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