Tenders for Tuesday’s 10-year Treasury bond auction reached P31.414 billion, more than three times the planned debt sale of P9 billion. Given the strong demand, the government successfully sold the paper at a coupon rate of 4.875 percent. 

 

This was lower than the May auction rate of a similar paper of 5.42 percent or a decline of 54.5 basis points.

 

Deputy Treasurer Eduardo Mendiola, who chaired Tuesday’s auction panel, said last week's 25-basis points policy rate cut by the Bangko Sentral ng Pilipinas (BSP) convinced investors to park their funds in government debt papers.

 

Last week, the BSP reduced the overnight borrowing rate to a record low of 3.75 percent and the lending rate to 5.75 percent on concerns over global growth risks. 

 

Mendiola said the government's announcement of a narrower-than-programmed budget deficit recorded in the first half of the year and the benign inflation environment also convinced investors to put their money in government securities.

 

According to the latest data from the Department of Finance, the national government incurred a budget deficit of P11.696 billion in June compared to P7.691 billion posted a year ago.

 

The June budget gap brought 2012’s first half deficit to P34.482 billion, plenty of room to spare as the programmed ceiling for the period is P109.341 billion.

 

The inflation rate, meanwhile, decelerated to 2.8 percent in June from May’s 2.9 percent, according to the latest data from the National Statistics Office.

 

The June inflation brought year-to-date inflation at three percent, at the low end of the Banko Sentral ng Pilipinas’ three-to-five percent target for 2012.

 

The government hopes to raise P108 billion from the sale of T-bills and T-bonds in the third quarter of the year or slightly higher than the programmed domestic borrowing of P106.5 billion in the second quarter. — DVM, GMA News