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Manila Bulletin devider Business devider 10-year benchmark interest rate drops

10-year benchmark interest rate drops

Published Jul 19, 2022 02:30 pm

Lingering concerns over higher inflation and aggressive tightening by the Bangko Sentral ng Pilipinas (BSP) failed to push up the interest rate for long-term government debt papers.

At the Bureau of the Treasury auction on Tuesday, July 19, the yield for the reissued 10-year Treasury bond, with a remaining life of nine-years and nine-moths, settled at 6.865 percent.

The average rate was lower than the 6.959 percent fetched in the secondary market, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates published on the Philippine Dealing System’s website.

Yield was also below the 7.25 percent coupon rate when same instrument was sold last June 21.

“Strong demand is an understatement in the auction,” National Treasurer Rosalia V. De Leon told reporters after the auction.

The bureau made a full award of its P35 billion offer, as total tenders reached P123.32 billion.

De Leon noted that there was strong investor appetite for long-term IOUs especially for retirement fund institutions due to “yield pick up.”

Investors wanted to lock in higher interest rates, the treasurer said.

Turnout of the government’s long-term borrowing, however, was a reverse of the higher rates fetched in the previous day.

At Monday's auction of Treasury bills on July 18, benchmark interest rates for short-term loans jacked up as bellwether 91-day Treasury bill rate, which banks use in pricing their loans, accelerated to 2.323 percent from 1.876 percent last week.

Yield on the 182-day T-bill also rose to 3.083 percent from the previous 2.907 percent, while interest rate on the one-year IOU jumped to 3.258 percent from 2.981 percent last week.

De Leon said the significant increase in government interest rates was expected after the BSP raised benchmark interest rates by 75 basis points to to 3.25 percent effective last Thursday.

“As expected, markets asked for higher rates following 75 basis points off cycle hike by BSP. Another 50 basis points is also now being put on the table as US Federal Reserve turns more aggressive with possible full percentage point to be delivered,” de Leon said.

The latest BSP policy action followed two back-to-back rate increases of 25 basis points each in May and June.

BSP Governor Felipe M. Medalla also signaled further tightening amid growing risks to inflation.

Related Tags

Treasury bonds government borrowings government securities T-bond Bureau of the Treasury National Treasurer Rosalia V. De Leon
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