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Rates on 3.5-year T-bonds decline.

Tuesday saw a decrease in the yield on the 3.5-year Treasury bond (T-bond), which, according to an economist, is in keeping with recent trends in both local and US government security yields.

The debt paper’s average rate decreased from 5.908 percent to 5.153 percent.

The auction committee made a full award after the Bureau of the Treasury (BTr) tendered the T-bond for PHP35 billion. At PHP106.323 billion, there were more than three times as many bids.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation (RCBC), told the Philippine News Agency that the debt paper’s interest rate is consistent with that of the three-year tenor in the secondary market, which is 5.11 percent, and the four-year tenor, which is 5.38 percent.

“(The) strong demand for T-bond/FXTN (fixed rate treasury notes) auctions recently (is) consistent with the easing of long-end PHP BVAL (Bloomberg Valuation Service) yields in line with the similar easing in long-term US Treasury yields amid signals of a potential recession that caused a decline in the price of oil and other commodities worldwide,” he said.

A possible recession in the largest economy in the world, the US, according to Ricafort, “could help ease inflationary pressures, fundamentally leading to the healthy downward correction in US/global/local long-term interest rates/bond yields after reaching new pre-pandemic highs in June 2022,” in addition to lowering global oil and commodity prices.

He continued, “The recent easing in long-term local government securities yields also supported sentiment in the local financial markets, including the recent appreciation of the peso to the strongest in nearly a month due to the recent appreciation of the US dollar vs. global/Asian/Asean currencies.”

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