T-bill yields rise as market adjusts to further BSP action

The Bureau of the Treasury partially awarded the T-bills it offered Monday on rising rates, raising P11.9 billion.

The Treasury accepted P3.585 billion out of the P5 billion in benchmark 91-day IOUs, capping the yield at 3.484 percent, up from 3.323 percent in the previous auction.

Tenders for the three-month treasury bills reached P6.718 billion.

The Treasury also awarded P2.464 billion of the P4-billion offering for 182-day debt paper, as the average rate rose to 3.873 percent from 3.766 percent last week.

Bids for the six-month government securities amounted to P5.685 billion.

As for the P6 billion in 364-day treasury bills on offer, P5.851 billion were accepted, as the annual rate further increased to 4.429 percent from last week’s 4.357 percent.

The one-year T-bills was oversubscribed, attracting P7.851 billion from investors.

National Treasurer Rosalia V. de Leon told reporters after the auction that the yields were being pushed higher by market expectations of further interest rate hikes by the Bangko Sentral ng Pilipinas this year.

“Even after the 50-basis point hike of the BSP, there’s a lot of analysts saying that it’s not enough, and there will be more rate hikes. The market already priced in [the expected further hikes],” de Leon explained.

The BSP’s policy-setting Monetary Board made two successive adjustments, with the overnight borrowing rate now capped at 3.5 percent.

The adjustments were made to arrest increasing commodity prices. Inflation rate peaked to its five-year high of 4.6 percent in May.

During the first five months, headline inflation averaged 4.1 percent, above the government’s full-year 2018 target of 2-4 percent.

De Leon added that the market was “on wait-and-see given what they saw in terms of the inflation outlook; at the same time, they are also looking at the peso.”

The peso weakened to nearly 12-year lows against the US dollar in recent weeks.

The market was “really predicting that there will have to be more policy actions to be taken by the BSP,” de Leon said.