More on Treasury bonds
Consider this: P37 billion raised by the government on its first sale of retail treasury bonds. These are attractive to small investors as they're available for as little as P5,000, they have better yields than bank deposits, plus they're practically risk-free.
The offering ended yesterday. You can imagine the appetite for government bonds, which raise debt yields. It was trying to raise just P10 billion on three- and five-year bonds, at a coupon rate of 11% and 11.75%, respectively, but ending up selling more than thrice its target.
P37 billion has just been drained out of the system, which is now in the hands of the government for its own use. That means a less liquid market. Less cash supply means less money available for lending and therefore higher interest rates. At the secondary market, both debt papers rose 11.2289% and 12.0423% respectively.
So, yes, we're looking at higher interest rates for loans, but also higher returns for fixed income investments.
