BTr caps 10-year bond rate to 6.213 percent

The Bureau of the Treasury (BTr) on Tuesday reported a full award on its 10-year Treasury bond (T-bond) sale characterized by robust bids from the various government securities eligible dealers (GSEDs).

“[There was strong participation by our dealers. The rate steepening bias also continued but it’s really more the demand right now because we haven’t really seen a lot of demand on the long end,” National Treasurer Rosalia V. de Leon told financial reporters.

The auction committee reported bids totaling P17.278 billion for the security but decided on capping the 10-year rate to 6.213 percent. The coupon rate set for the IOUs settled at 6.250 percent, or an increase of  3.7 basis points compared to the average annual rate.

According to de Leon, there was a demand from the institutional investors on the long end of the yield curve that allowed them to recognize their participation in the auction: “The institutional investors would also need to fill their requirements for the yield pick up and also for the longer maturity.”

De Leon also said external events were seen likely to drive the uptrend in rates for government securities such as inflation and the anticipated policy adjustments by the Federal Reserve System (the Fed).

“At the same time we have a lot of other concerns like what happened in Syria. But then the steepening bias will continue given that inflation is a persistent issue for our investors. We also see the new appointments at the Fed. They would have to be watchful in terms of what would be the pronouncements coming out of these new Fed [governors],” she added.

As for government securities maturing next month, de Leon said the Treasury’s bond sinking fund has ample funds to address maturing IOUs. She further said more and newer government securities sales are not urgently needed for now.

“Remember we have a bond sinking fund. We have already been making contributions in anticipation of the chunky ones [maturities] because it would be imprudent on our end if we just leave it to the auction sales to fund the maturing [obligations]. That’s already been taken care of,” she added.

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