Speculation about a possible policy rate adjustment and higher full-year inflation pushed up the yield for long-term Philippine debt papers.
At a Bureau of the Treasury auction on Tuesday, Nov. 9, the interest rate for the 10-year Treasury bond went up to 5.130 percent from 4.468 percent last September when the IOU was last sold.
Investors were willing to buy as much as P55.369 billion of the T-bonds, but the government only accepted P35 billion worth of bids as programmed.
“While inflation has decelerated, the market is still concerned about the higher than target inflation,” National Treasurer Rosalia V. de Leon told reporters after the auction.
“And with strong third-quarter GDP , investors are speculating that the BSP may start raising rates,” she added.
The Philippine Statistics Authority (PSA) reported that the economy, as measured by the country's GDP, grew 7.1 percent in the third-quarter, surpassing the 4.8 percent consensus market forecast.
The GDP performance was also a reversal of last year's 11.6 percent contraction, but slower than the upward revised 12 percent expansion seen in April to June 2021.
The third quarter number brought the country's nine-month GDP growth to 4.9 percent, settling at the upper end of the government’s revised target of 4.0 percent to 5.0 percent for the year.
Meanwhile, de Leon said the bureau has yet to make a decision on the tenor and timing of the planned issuance of retail treasury bonds (RTBs) before the end of the year.
However, she noted that the slower inflation print in October as well as the better than expected third-quarter GDP augured well for another RTB offering.
“We got strong reception for all our jumbo offering so far. But the more the merrier,” de Leon said.
Last March, the government raised P463.3 billion from an RTB sale, a portion of which was used to boost the country’s war chest to fight the prolonged pandemic.
The three-year retail bonds were priced at a coupon of 2.375 percent. Small investors were allowed to buy these in minimum denominations of P5,000.