After BSP rate hike, domestic creditors seek higher T-bill yields
MANILA, Philippines—Following the Bangko Sentral ng Pilipinas’ (BSP) decision to hike key interest rates by 25 basis points (bps), domestic creditors sought higher yields for the Bureau of the Treasury’s (BTr) short-term borrowings.
As such, the BTR raised only P8.5 billion out of its P15-billion offering of short-dated T-bills as it rejected all of the 364-day IOUs.
The average rate for P5 billion in the benchmark 91-day treasury bill rose to 1.675 percent from 1.531 percent two weeks ago. The BTr rejected bids for three-month securities last week, or else the rate would have climbed to 1.759 percent in case of a full award.
The BTr capped the bid rates pitched by government securities eligible dealers (GSEDs) for 182-day T-bills at 1.892 percent, hence awarded just P3.5 billion out of the P5 billion it wanted to borrow. Prior to Monday’s auction, the BTr fully rejected offers from GSEDs to lend via six-month debt paper for two straight weeks. Three weeks ago, the average rate fetched by the 182-day was 1.635 percent.
As for 364-day treasury bills, the BTr declined to borrow for the third consecutive week. If the BTr raised P5 billion, as programmed, from one-year IOUs, the average annual rate would have reached 2.93 percent — a high of 3.925 percent and a low of 2.1 percent. During the first week of May, the 364-day securities were partly awarded at 1.933 percent.
National Treasurer Rosalia de Leon said the last time that 364-day T-bills’ primary rates breached the 3-percent-per-annum rate was in April 2020, when it averaged 3.371 percent.
De Leon said “the market was being defensive with high inflation and unwind of easy monetary policies with rate hikes and reduction of government securities purchases” here and abroad.
For the first time since November 2018, the BSP’s policy-setting Monetary Board last Thursday hiked the overnight reverse repurchase (RRP) or policy rate — at which the central bank lends to banks — to 2.25 percent from the record-low 2 percent earlier kept amid the prolonged COVID-19 pandemic to support economic rebound.
In April, 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 conducive to economic growth, no thanks to expensive food and oil products.
Tenders at Monday’s T-bill auction were nonetheless 2.4-times bigger than the borrowings plan, as domestic creditors offered to lend a total of P36.5 billion.
Last Friday, the yield on BSP-issued debt securities jumped to 2.3183 percent.
The BSP raised P140 billion from 28-day IOUs, as banks offered to lend up to P172.9 billion or 1.24 times bigger than the offering. “The auction received good demand from eligible participants,” BSP Deputy Governor Francisco Dakila said in a statement late Friday. The BSP was also able to borrow a bigger amount than the previous week’s P130 billion.
However, the accepted yield for the one-month BSP bill rose to a range of 2.0875 to 2.495 percent from 1.9825 to 2.3 percent previously. As such, the debt instrument maturing on June 21 fetched a higher average yield by 14.362 basis points (bps) from the previous auction’s 2.1747 percent.
“The results of the 28-day bill auction reflects in part the 25-bp hike in the BSP policy rate which became effective [Friday],” Dakila said.
“Nevertheless, liquidity in the financial system remained ample,” Dakila added, citing the oversubscribed offering.
“Going forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” according to Dakila.
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