Treasury rejects T-bill bids as jittery creditors demand higher rates
MANILA, Philippines—The Bureau of the Treasury (BTr) on Monday (May 16) did not push through with borrowing a total of P15 billion from domestic creditors who wanted higher yields from short-dated T-bills.
“The market remains defensive and bracing for a possible rate hike by the Monetary Board with stronger-than-expected first-quarter gross domestic product (GDP) growth,” National Treasurer Rosalia de Leon said after the treasury bills auction. GDP expansion surprised at 8.3 percent year-on-year in the first three months of 2022 amid further economic reopening and despite an Omicron-induced surge in COVID-19 infections at the start of the year.
Had the BTr borrowed P5 billion through the benchmark 91-day T-bill, its average rate would have climbed to 1.759 percent from 1.531 percent last week.
Similar to the previous auction, the BTr also rejected P5 billion each in 182- and 364-day IOUs, whose rates would have jumped beyond 2 percent — 2.215 percent for six-month debt and 2.828 percent for one-year.
In a statement, the BTr noted that the bid rates pitched by government securities eligible dealers (GSEDs) across the three tenors were not only above yields during last week’s auction, but also higher than prevailing market rates.
GSEDs were willing to lend the government as much as P23.5 billion, making the auction 1.5 times oversubscribed.
Market consensus was for the Bangko Sentral ng Pilipinas (BSP) to keep the policy rate at the current record-low 2 percent when its highest policy-making body, the Monetary Board, meets on Thursday (May 19). However, a number of economists and financial institutions were bracing for a surprise BSP decision.
In the case of the UK-based think tank Pantheon Macroeconomics, its chief emerging Asia economist Miguel Chanco said he expects no change in the overnight reverse repurchase facility or key policy interest rate that banks use.
“Inflation has risen sharply in recent months, but it’s so far moving consistently with the BSP’s March forecasts,” Chanco said in a report on Monday. Headline inflation hit a 40-month high of 4.9 percent year-on-year, above the BSP’s 2 to 4 percent target band of manageable price hikes, due to expensive food and fuel.
But Chanco conceded that “the risks are rising for a potential
rate hike, especially in the wake of last week’s consensus-beating GDP print for the first quarter.” Strong economic growth may allow the BSP to jack up interest rates which had kept the economy afloat amid the prolonged COVID-19 pandemic.
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