THE yield of 10-year Treasury Bonds fell during Tuesday’s auction at the Bureau of the Treasury, still a result of excess liquidity in the market.

The debt paper maturing on 2021 fetched a rate of 5.485 percent, or lower by 41.1 basis points from the last time the said securities were auctioned off on August 2.

The said yield was also lower compared with the secondary market rate of the same tenor at 5.549 percent.

Tenders reached more than four times to P41.79 billion, but the government made a full award of P9 billion.

National Treasurer Roberto Tan told reporters after the auction that the government may open its over-the-counter facility, which is available for tax-exempt institutions and government-owned and -controlled corporations (GOCCs).  

Tan said the recent neutral stance of the Bangko Sentral ng Pilipinas on the policy rates enforced the market’s confidence on government securities.

“Expectations are also favorable on the inflation environment. Liquidity is continuing partly caused by the increased inflows,” Tan said.

Last week the country’s inflation rate slowed down to 4.7 percent in August from the previous rate of 5.1 percent.

“With the year-to-date average at 4.3 percent [using the year 2000 basket and 4.8 percent using 2006 prices], we are poised to meet the full-year inflation target. The August turnout supports our assessment of a manageable inflation environment over the policy horizon,” BSP Governor Amando Tetangco Jr. said last week.

The central bank is targeting an average inflation rate of 3 percent to 5 percent for the year.

Meanwhile, the government will still pursue the remaining $500-million commercial borrowing plan for the year, but the Treasury will explore other funding sources available.

“We may source it abroad or locally,” Tan said, adding that the agency still has to secure approval from the Office of the President.

Maturities for the week amount to less than P1 billion, most of which are Treasury Bills.