10-year bond rate improves to 4.617%

(Investors are offering a rate) still lower than the (secondary market) so the committee decided to award it in full.

Investor would rather invest in long-dated securities still and on Tuesday placed a massive volume of bids on 10-year Treasury bonds (T-bond), the Bureau of the Treasury (BTr) said Tuesday.

As a result, the BTr awarded in full P20 billion worth of T-bonds whose sale attracted P29.3 billion worth of tenders, representing an oversubscription of the original amount by 1.5 times.

Deputy Treasurer Erwin Sta. Ana said that in addition to the high demand, the security’s yield proved lower than the secondary market and helped seal the decision to grant a full award.

“(Investors are offering a rate) still lower than the (secondary market) so the committee decided to award it in full,” Sta. Ana told reporters.

According to him, the expected yield pick-up on securities with longer maturity explains the shift in investor preference toward the long-end of the yield curve.

“If the interest rates are falling, the tendency is to go for a yield pick-up so the longer tenors will give you that. We see there is definitely a demand on the 10-year paper,” he explained.

“We saw the 10-year rate was actually at its lowest sometime in August this year, but after August, the rate picked up. So now we’re just a little bit stable at 10-year,” the Treasury executive quickly added.

The reissued 10-year T-bond rate now averages 4.617 percent or 42.1 basis points higher than the previous rate of only 4.196 percent. This was, however, 6.6 basis point lower than the secondary market rate averaging 4.683 percent.

The volume of 10-year bonds thus far sold by the BTr total P140 billion.