364-day T-bill rate capped as above 5 percent inflation seen in May
MANILA, Philippines—The Bureau of the Treasury (BTr) on Monday (June 6) capped the 364-day T-bill rate to 2.297 percent per annum as expectations of above 5-percent May inflation rate made domestic creditors seek higher yields.
The BTr borrowed a total of P13.9 billion out of the P15-billion treasury bills offering. It fully awarded P5 billion each in the benchmark 91- and 182-day securities.
The average rate for three-month debt paper eased to 1.44 percent from 1.46 percent last week, while the six-month yield inched up to 1.834 percent from 1.812 percent previously.
For 364-day IOUs, P3.9 billion was raised at the capped average annual rate. Bid rates hit a high of 2.35 percent and a low of 1.9 percent for one-year securities.
National Treasurer Rosalia de Leon attributed the partial award of the longest T-bill tenor to lenders’ bids which she said continued to be on an uptrend.
De Leon said the debt market was guided by pronouncements of Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno that the central bank would likely further increase key interest rates by 25 basis points (bps) this month, following last month’s first rate hike since November 2018, to rein-in elevated inflation.
The US Federal Reserve was also expected to hike rates by 50 bps during its next meeting, De Leon added.
Also, the market priced in headline inflation possibly hitting over 5 percent last month, De Leon said. The government will report on May inflation on Tuesday (June 7).
BDO Unibank chief market strategist Jonathan Ravelas projected the year-on-year rate of increase in prices of basic commodities last month at 5.5 percent, similar to the forecast of Dutch financial giant ING.
Singapore’s DBS Bank estimated May inflation at 5.3 percent year-on-year; UK-based think tank Pantheon Macroeconomics, 5.2 percent; and Moody’s Analytics, 5.1 percent.
“Inflation probably rose less sharply in May, after spiking to 4.9 percent in April, on the back of a further rise in food inflation. This should mark the peak,” Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco said in a report.
“We expect the BSP to remain vigilant and geared to combating inflation, having kick-started its policy normalization cycle in its May meeting. The likelihood of back-to-back rate hikes in the June meeting is high, with current Governor Diokno and incoming Governor [Felipe] Medalla both signaling a possible interest rate increase in June,” DBS said.
TSB
