STOCK PHOTO
MANILA, Philippines—As June inflation zoomed past 6 percent, local creditors on Tuesday (July 5) demanded higher yield for lending the government through reissued four-year bonds.
The Bureau of the Treasury (BTr) awarded all P35-billion debt paper maturing in February 2026, even as the average annual rate rose to 5.908 percent.
Bid rates from government securities eligible dealers (GSEDs) hit a high of 5.999 percent and a low of 5.6 percent. In the secondary market, the same IOUs fetched a 5.742-percent yield, while other comparable four-year bonds were priced at a lower 5.573 percent.
National Treasurer Rosalia de Leon noted that the average rate during the auction was about 20 basis points higher than secondaries.
“Markets priced in expectations of the Bangko Sentral ng Pilipinas (BSP) turning hawkish with the June inflation print of 6.1 percent higher than consensus,” De Leon said.
The year-on-year rate of increase in prices of basic commodities last month was the highest since a similar 6.1 percent in November 2018, amid the then rice crisis which led to liberalization to opening doors for full-scale importation.
Headline inflation averaged 4.4 percent in the first half, above the BSP’s 2 to 4 percent target range of manageable price hikes conducive to economic growth.
As high inflation was expected to linger for the rest of the year, De Leon said the BTr “will have to calibrate if cash remains ample and if bid rates exceed the tolerance level to reject” GSEDs’ bids. “It’s always a careful balancing act.”
GSEDs were willing to lend the government up to P56.2 billion at Tuesday’s auction.
The BTr plans to raise P200 billion from the domestic debt market in July, the first month of President Ferdinand Marcos Jr.’s administration.
The government had programmed to borrow a total of P2.2 trillion this year, of which three-fourths will be raised via T-bills and bonds to temper forex risks as well as take advantage of a liquid financial system.