Inflation fears drive reissued Treasury bond rates up

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INFLATION concerns drove average rates up in Tuesday’s auction of 35 billion pesos in reissued 7-year T-bonds.

Despite the increase in the average rate, the Treasury Office still decided to fully allocate the proposed T-bonds.

With a residual maturity of 6 years and 10 months, the expiry date is August 12, 2028. Its coupon rate was 3.75%.

The stock reached an average rate of 3.826%, 3.7 basis points higher than the 3.789% of the previous auction.

While the total of bids submitted reached 76.13 billion pesos, the auction ended up being more than twice oversubscribed. With a residual maturity of 6 years and 10 months, the expiry date is August 12, 2028. Its coupon rate was 3.75%.

National Treasurer Rosalia V. De Leon said that “tariffs have increased due to continuing concerns”.

The country’s inflation rate for August hit a 2-year high at 4.9%. This is the highest since December 2018, when inflation was 5.1%.

The Bangko Sentral ng Pilipinas (BSP) is expected to hold its next monetary policy meeting on Thursday, but economists expect the BSP to keep its key rates unchanged.

De Leon said the auction committee also turned on the tap for an additional 5 billion pesos bid for eligible government securities dealer-makers.

For this month, the Treasury is expected to borrow a total of 250 billion pesos on the local debt market, higher than the 200 billion pesos program in August.

Broken down, 175 billion pesos will be raised through the auction of treasury bonds while the remaining 75 billion pesos will be generated through the sale of treasury bills.

This year, the national government plans to borrow a total of 3.1 trillion pesos mainly from the local debt market.

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