REJECTION OF BIDS. Demand for higher yields resulted in the rejection of bids for the seven-year Treasury bond (T-bond) on Tuesday (June 28, 2022). National Treasurer Rosalia de Leon said investors wanted an excessive buffer in line with expectations for continued increase of central banks key rates. (Photo from BTr)
MANILA – High yield demands for a seven-year Treasury bond (T-bond) resulted in the rejection of bids for the paper during an auction on Tuesday.
Had the auction committee awarded the securities, the average rate of the T-bond would have risen to 6.947 percent from 6.740 percent previously.
The Bureau of the Treasury (BTr) offered the T-bond for PHP35 billion, and total tenders reached PHP62.253 billion.
“Market excessively priced risk premium in this offering just issued recently,” National Treasurer Rosalia de Leon told journalists.
De Leon said the “market (is) providing too much buffer with expected aggressive rate hikes to come.”
This as central banks continue to hike their key rates to help tame rising inflation rates.
For one, policy rates of the Bangko Sentral ng Pilipinas (BSP) have been increased by a total of 50 basis points since last May as inflation rate surpassed the government’s 2-4 percent target band.
Domestic rate of price increases accelerated to 4.9 percent last April and further rose to 5.4 percent in May, bringing the year-to-date average to 4.1 percent.
Monetary authorities expect inflation to post faster rates in the coming months due to the impact of higher global commodities prices and domestic supply constraints on fish, among others.
The Federal Reserve’s key rates have been increased by a total of 150 basis points since last March and Fed officials hinted of continued tightening to address the 40-year high inflation rate in the US. (PNA)
