PHL ratings upgrade results to rise in 3-yr T-bond rate

By on May 21, 2014

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MANILA — Interest rates of the Philippines freshly-issued three-year Treasury bond (T-bond) rose Tuesday on account of the recent upgrade of the country’s investment grade rating.

Rate of the debt paper went up by 47.6 basis points to 2.875 percent.

”It’s because of the upgrade and expectation of a good first quarter growth. And of course the liquidity and all the nice things being said about the Philippines,” said National Treasurer Rosalia de Leon.

It can be recalled that last May 8 Standard & Poor’s (S&P) hiked by a notch its investment grade rating on the Philippines to ‘BBB’ with stable outlook from ‘BBB-‘.

The upgrade was made after the debt watcher gave the country an investment grade rating in May 2013.

The debt watcher said the ratings hike was made “because we now believe the ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration.”

De Leon said high demand for the shorter-term paper was also a factor in the increase in its interest rate.

The Bureau of the Treasury (BTr) offered the debt paper for P25 billion and made a full award after tenders were more than three times at P76.69 billion.

Relatively, the National Treasurer said that based on their analysis interest rate would really increase to where it ended during Tuesday’s action.

However, the rise of the interest rate of the BTr-issued paper it is still lower than the secondary market rate of 3.2 percent for the done deals.

De Leon said demand for the short-term debt paper has been expected given the current volatilities in the financial market.

“The appetite is really on the short term end,” she added.

The government has yet to release the 2014 first quarter performance of the domestic economy and the government is positive that it will be within the its 6.5-7.5 percent full year growth target.