Purisima: No reason for rise in bond yields


Posted at Jan 27 2011 07:59 PM | Updated as of Jan 28 2011 03:59 AM

MANILA, Philippines - Finance Secretary Cesar Purisima sees "no reason" for bond yields to increase as market liquidity remains adequate and inflation benign.

Purisima made the statement after the Bureau of Treasury rejected last Monday all bids in a tender for P8.5 billion worth of bills because investors were seeking higher yields, citing inflation concerns.

"This rise in the past few days is really not warranted," he said.

"The local domestic liquidity is really good, it's continuing to increase and it's now already over P1.3 trillion. There's really no reason for rates to increase because of the supply and demand of credit," he added.

Yields on the 91-day bill and 182-day dropped to record lows of 0.7% and 1,563%, respectively, at an auction on January 10. The 364-day yield climbed to 2.456% on the same day.

If the government had accepted the bids this week, the yields on the 3-month and 6-month debt papers would have jumped to 3.34% and 4.092%, while the yield on the one-year paper would have risen to 4.439%.

National Treasurer Roberto Tan earlier said that the government was prepared to reject high bids at weekly auctions of domestic debt papers as recent increases in bonds yields were unwarranted.

Purisima, meanwhile, said manageable inflation gives the central bank room to keep policy rates low.

"In terms of inflation numbers, the central bank is closely monitoring and it's well within our program."

Inflation came in at 3% in December, within the central bank's target.