THE Bureau of the Treasury fully awarded P35 billion in reissued 10-year Treasury Bonds (T-bonds) on Tuesday as it gave in to investors’ demand for higher rates.
With a remaining term of 9 years and 8 months to maturity, the security capped at an average rate of 6.894 percent, higher than the comparable secondary market benchmark rates.
This is up by 48.7 basis points from the Bloomberg Valuation Service Reference Rate for the 10-year tenor at 6.407 percent. Likewise, this is also up by 59 basis points compared with the BVAL rate for the security itself at 6.304 percent.
National Treasurer Rosalia V. De Leon said investors sought higher rates as the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve are expected to resort to more rate hikes to combat inflation.
“Higher rates demanded by market for duration premium following BSP rate hike and expectations of similar follow up actions both from Fed and [the] BSP to tame inflation,” De Leon told reporters in a message.
Nonetheless, the debt papers attracted a total of P72.9 billion in bids, making the auction more than twice oversubscribed.
Last week, the BSP raised rates for the first time since the pandemic as the country’s monetary authority tries to get a hold of the rising inflation expectations in the country.
At its meeting, BSP Governor Benjamin E. Diokno announced that the Monetary Board decided to raise the interest rate on the BSP’s overnight reverse repurchase facility by 25 basis points to 2.25 percent, effective May 20. Accordingly, the interest rates on the overnight deposit and lending facilities were raised to 1.75 percent and 2.75 percent, respectively.
Based on BSP’s latest forecast, inflation is seen to hit 4.6 percent for the year, from the previous forecast of 4.3 percent. This is beyond the ceiling of the government’s inflation target band of 2 percent to 4 percent.
As of end-March, the national government’s outstanding debt has hit a new record-high of P12.68 trillion as borrowings continued to pile up as the pandemic scarred the economy.
The national government’s debt-to-GDP ratio has also risen to a 17-year-high at 63.5 percent, above the internationally recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines.
This is also the highest since the country’s debt-to-GDP ratio hit 65.7 percent in 2005 under the Arroyo administration.
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