T-bonds fetch higher yields

Newly issued five-year Treasury bonds fetched higher yields yesterday due to rising global uncertainties.

During yesterday’s auction, newly issued five-year T-bonds fetched an average rate of 3.876 percent, up 63 basis points from the previous rate of 3.246 percent.

This was, likewise, higher than the secondary market rates of 3.84 percent before the auction, but lower than the coupon rate of four percent.

“The auction set a coupon rate of four percent, in line with market expectations, as benchmark rates track global adjustment,” the Treasury said in a statement.

Total tenders reached P35.6 billion, more than double the P15 billion offer.

Emilio Neri, lead economist at the Bank of the Philippine Islands, said the yields followed global trends as traders are now demanding additional premium given the more volatile external environment.

“The 3.87 percent is much more closer where the market has been trading over the past few weeks and it seems priced in all the major developments after May 2016, including the increase in FOMC (Federal Open Market Committee) policy rates last December, and maybe the win of Donald Trump in the US election,” Neri told The STAR.

“So whereas before, the market was willing to part with their funds at a lower rate, this time around they wouldn’t want to channel their funds without the compensating yield,” he added.

The BTR earlier this month sold P15 billion worth of threeyear T-bonds.

The paper fetched an average rate of 3.364 percent.

Under the 2017 budget, the government plans to borrow P631.29 billion, down from the 2016 target of P695.4 billion.