YIELDS on the 7-year Treasury bonds (T-bonds) were lower than comparable secondary-market rates as the auction drew strong demand from investors pricing in lower chances of an aggressive rate hike from the central bank as weak economic growth persisted.
The Bureau of the Treasury finally awarded in full the bids for 7-year securities as tenders reached P51.920 billion, or 1.7 times the P30 billion offering.
Total bids were much higher compared to the P18.057 billion tendered during the previous auction for the 7-year T-bonds last July 14.
The Treasury has been rejecting bids for 7-year T-bonds recently and last made a full award for the tenor last June 16 when the yield averaged at 6.779 percent due to the US-Iran interim deal back then, which lowered world oil prices.
The T-bonds, which have a remaining life of seven years and six days, fetched an average yield of 7.182 percent.
Investors’ asking yield ranged from a low of 7.1 percent to a high of 7.182 percent.
The Treasury said the average rate is ‘broadly in line with the prevailing secondary market benchmark rate’ as this is slightly lower by 1.5 basis points than the 7.197 percent yield for the 7-year tenor.
However, the average auction yield is higher than the government security’s original coupon rate of 6.625 percent.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said yields eased as investors saw less need for aggressive rate hikes.
Ricafort was referring to the signaling by Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona of reduced pressure for the central bank to raise the key interest rate as second-quarter economic growth was weaker-than-expected.
Remolona said last Monday that the BSP could still tighten monetary policy ‘as much as necessary’ to bring inflation back down to its target range of 2 to 4 percent.
July inflation eased to 6.2 percent from 6.4 percent in June, extending the downtrend from the 7.2-percent peak in April.
The Monetary Board, the highest policy-making body of the BSP, will hold its next rate-setting meeting on August 27.
Next week, the Treasury will auction 91-, 182- and 364-day Treasury bills, as well as 4-year and 10-year T-bonds.
This is part of the government’s P2.733 trillion borrowing program this year, which follows a 70:30 financing mix.
The national government’s outstanding debt ballooned to a new record high of P19.065 trillion as of end-June, or 66 percent of the gross domestic product in the second quarter.