PH’s 10-year debt yield up

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MANILA, Philippines—The Bureau of the Treasury (BTr) on Tuesday (June 21) raised P34.9 billion through new 10-year bonds, slightly short of the amount it intended to borrow as yield picked up alongside “supersized” interest rate hikes here and abroad.

The fresh debt paper maturing in June 2032 fetched a coupon rate of 7.25 percent, as bid rates at which government securities eligible dealers (GSEDs) were willing to lend to the BTr hit a high of 7.37 percent and a low of 6.95 percent.

In the secondary market, comparable 10-year treasury bonds had a lower 6.944-percent yield.

As such, the BTr capped its borrowings, although only a little below the P35-billion offering. Local creditors were willing to lend the government as much as P67.3 billion or almost two times bigger than the planned borrowing.

“We saw a strong volume despite the long maturity, but at a steep price,” National Treasurer Rosalia de Leon said.

The demand or willingness from the debt market to snap up long-dated IOUs nonetheless “provided cushion against back-to-back rate increases to be delivered by both the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) in their next meetings to slay the ugly head of inflation,” De Leon said.

The BSP was expected to hike key interest rates when its policy-making Monetary Board meets on Thursday (June 23) to tackle the monetary policy stance, as it chases aggressive rate hikes of the US Fed amid elevated consumer prices globally spilling over locally.

Analysts watching the Philippines were divided on whether the BSP would increase the policy rate by just 25 basis points (bps) or a possibly larger 50 bps.

The Philippines borrows bulk of its budget financing from domestic lenders than externally to temper foreign exchange risks and take advantage of oozing liquidity in the financial system. Higher domestic yields, however, would also jack up interest payments for these debts. This year, the BTr will borrow a gross amount of P2.2 trillion, of which three-fourths—or P1.65 trillion—would be raised from treasury bills and bonds.

TSB


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