Treasury awards all P 35B in reissued T-bonds offered

The Bureau of the Treasury on Wednesday sold all P35 billion of the reissued five-year bonds it offered despite continued rise in rates.

The IOUs with a remaining life of four years and five months were awarded at an annual rate of 3.762 percent, up from 3.576 percent when issued last month, as bid rates hit a high of 3.87 percent and a low of 3.65 percent.

Tenders reached P46.6 billion, making the auction oversubscribed.

National Treasurer Rosalia de Leon said the Treasury had expected a higher rate submission, but in case bids got too high, the government was in a good cash position to reject the offers.

Rising rates came on the back of inflation jitters and the anticipated tapering moves of the US Federal Reserve.

Economists at UK-based Oxford Economics said during a webinar last week that the Philippines and most Asian economies were in a better shape now compared to the so-called “taper tantrum” in 2013 when bond yields spiked, while De Leon pointed to the assurance from the Bangko Sentral ng Pilipinas (BSP) that inflation would eventually return to within the target range.

Last week, investment banking giant Goldman Sachs said that base effects from this year’s elevated prices plus food imports flooding the market would revert inflation in the Philippines within the government’s target range early next year.

“We forecast higher headline inflation in 2022, compared to our prior forecasts, in all countries except the Philippines … Easing food supply constraints in the Philippines could push headline inflation meaningfully lower by early 2022,” Goldman Sachs Economics Research said in an Oct. 26 report on Asean.

Goldman Sachs slightly lowered its 2022 inflation forecast for the Philippines to 3.2 percent from 3.3 percent previously, while updated estimates for Indonesia, Malaysia, Singapore and Thailand all rose.

For 2021, Goldman Sachs slightly jacked up its inflation estimate for the Philippines to 4.5 percent from 4.4 percent. Inflation in the Philippines this year would be the fastest among the five Asean countries in the Goldman Sachs report.

“Food supply constraints due to swine flu earlier this year, and the impact of typhoon-related disruptions on fish and fresh vegetable prices more recently, have kept headline inflation in the

Philippines significantly above the BSP’s 2-4 percent target band for much of 2021,” Goldman Sachs noted. Inflation averaged 4.5 percent as of end-September.

—Ben O. de Vera