The Bureau of the Treasury (BTr) on Tuesday allowed the five-year bond rate to rise by 15.4 basis points to 4.03 percent. Treasury officials recognized the premium bond investors demand from the government as a result of uncertainties generated by such significant events as the timing of the next interest-rate adjustment by the US Federal Reserve (the Fed), among others.
The BTr awarded the entire set of Treasury Bonds (T-bonds) amounting to P15 billion on the back strong market demands for the IOUs with a remaining shelf life of four years and 11 months.
The government securities amounting to P15 billion were reissued T-bonds with an original tenor of five years. It attracted tenders more than two times oversubscribed amounting to P38.8994 billion. The auction committee had to reject P23.994 billion.
“It’s more than two-and-a-half times oversubscribed, and the awarded rates are within benchmarks. It’s a very healthy turnout for the auction,” Deputy Treasurer Erwin D. Sta. Ana said.
The rise to 4.030 percent escalated from the same T-bonds averaging only 3.876 percent at its previous sale.
“The demand is actually coming from uncertainties because everyone’s expecting that rates would be on a higher trajectory, given the external volatilities. So the preference of the market at this point is essentially at the short end of the curve,” he said.
According to Sta. Ana, the demand leaned for the shorter-dated IOUs was expected, owing in part to external uncertainties, including the fiscal policies of the US government, the impact on the European Union as consequence of the Brexit event and actions from the US Fed.
“Well, you’re looking at the Fed actions, the fiscal policies of the US administration and, of course, uncertainties in Europe. So these added up to the uncertainties,” he said.
“The continued support coming from the market validates the bureau’s strategy of tapping key points and injecting liquidity to the domestic curve. Going forward, the approach will be to remain vigilant of market developments that influence movements in international and domestic rates,” the BTr added.