20-year T-bonds fetch higher rates
Newly issued 20-year Treasury-bonds (T-bonds) fetched higher rates yesterday amid expectations of policy tightening in the US and the Philippines, as well as the uptick in inflation last month, according to the Bureau of the Treasury (BTr).
During yesterday’s pricesetting auction, securities maturing by 2038 fetched a coupon rate of 6.5 percent, 146.5 basis points higher than the 5.035 percent recorded during the previous auction in June last year.
This is despite the partial award made by the auction committee after capping the accepted rates at 6.6 percent.
As a result, only P8.853 billion of the P22.766 billion tenders provided by the market was accepted by the Treasury.
National Treasurer Rosalia de Leon attributed the rise in rates of the 20-year debt papers to the expectations of a policy rate hike by the US Fed and the Bangko Sentral ng Pilipinas.
“First, of course, we see expectations about the Fed rate hike. And then of course, domestically, they’re also waiting for the BSP to hike rates,” De Leon said.
De Leon said this may have also been driven by the surge in inflation, which picked up to four percent in January. “And of course, this is a long bond and it’s a new issue so there is liquidity premium,” she said.
Finance Secretary Carlos Dominguez, who was also present during the auction, said the Treasury only made a partial award amid the healthy cash position of the government.
Dominguez cited the successful issuance of retail Treasury bonds amounting to P255 billion in December 2017, as well as the $2 billion sale of global bonds last month.
Meanwhile, De Leon and Dominguez yesterday bared the government’s plan to issue samurai bonds to fund the redevelopment of the Nampeidai property in Tokyo.
“For the samurai bond, we’ll really spend the money in Japan. I told you we will reconstruct the chancery there,” Dominguez told reporters after the auction.