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 PRESSROOM / NEWS
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 | Republic of the Philippines
DEPARTMENT OF FINANCE
Roxas Boulevard Corner Pablo Ocampo, Sr. Street
Manila 1004
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June 8, 2010
7-YEAR T-BOND AUCTION RESULTS: JUNE 8, 2010
BTr
FPPO-JEP
The yield of the reissued 7-year Treasury bonds was little changed in today’s auction. It inched up by just less than 5 basis points as the increase was tempered by the strong demand shown by the market players today on the back of market liquidity and the recent positive developments in the domestic front. But despite the slight upward movement in the yield, the National Government still successfully sold the reissued 7-year T-bond as planned as the rate fell way below the prevailing rate in the secondary market. The Auction Committee raised P8.5 billion worth of the reissued debt paper for an average rate of 7.03 percent, just a little over from the 7.0 percent coupon rate and the 6.893 percent average rate this paper fetched when first issued last March 30. Today’s auction demonstrated an improved market sentiment as market players showed renewed interest on bonds, tendering bids more than twice the size of the offering. The rise in the rate today was very insignificant that it could again be just due to market fluctuations.
Today’s auction was basically a testament of a confluence of driving factors, the bond market’s excess liquidity and the positive economic developments. The system was obviously awash with investible funds thus market players were really cash-rich as they came in today’s auction. They were obviously looking for safe facilities where they can park their excess funds. This renewed interest for government debt papers specifically for longer-tenor debts such as this somewhat gave the government today a relief from the pressure of high yields.
The series of favorable and positive developments in the domestic economy, on the other hand, played a major role on the positive market sentiment today. Despite the surprising better-than-expected 7.3 percent GDP growth in the first quarter, the government announced last week that inflation eased in May to 4.3 percent from 4.4 percent in April. It was near the low end of the BSP’s forecast range of 4.2 percent to 5.1 percent and brought the year-to-date average inflation to 4.3 percent, lower than the 5.7 percent in the same period last year. This led the BSP to lower its inflation forecast for 2010 to 4.7 percent from 5.1 percent and for 2011 to 3.6 percent from 3.7 percent. On its policy meeting last Thursday, the Monetary Board kept the overnight borrowing and lending rates unchanged at 4.0 percent and 6.0 percent, respectively on the back of a still manageable inflation, boosting all the more investors’ sentiment.
Fetching a yield today way lower than the prevailing market rate, the Auction Committee sold as planned today worth P8.5 billion. The debt paper yielded an average rate of 7.03 percent, 34.42 and 17.0 basis points lower when compared with the PDST-F rate of 7.3742 percent and with the PDST-R1 rate of 7.2 of this debt paper in the secondary market, respectively. Bids today ranged from a low of 6.875 percent to a high of 7.10 percent. The sale was slightly more than twice oversubscribed with tenders reaching P17.089 billion against the offering indicating market’s strong demand.
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