Clues from Fed trigger higher rates for PH IOUs

INQUIRER FILE PHOTO

MANILA  -The Bureau of the Treasury (BTR) on Monday raised P10.6 billion from the auction of Treasury bills (T-bills), with yields rising slightly amid hawkish signals from the United States Federal Reserve and following last week’s decision by the Bangko Sentral ng Pilipinas to keep local benchmark interest rates.

The BTR awarded in full its 91-day offering, raising P5 billion even as the average rate increased to 6.0866 percent from 6.029 percent a week earlier.

The auction committee, however, partially awarded bids for the 183-day and 365-day peso-denominated fixed income securities, raising from the offers P2.97 billion and P2.61 billion, respectively.

The six-month IOU fetched 6.144 percent, higher than the June 19 auction rate of 6.081 percent, while the one-year debt paper was capped at 6.219 percent, higher than the previous 6.166 percent.

“The auction was 1.2 times oversubscribed, attracting P17.6 billion in total tenders,” the committee said in a statement.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort told the Inquirer that this slightly higher auction yields have been persistent for the fifth straight week.

This, following hawkish signals from the US central bank, he noted. Fed Chair Jerome Powell hinted at one to two more rate hikes for the rest of 2023.

Ricafort added these potential hikes could be matched locally to maintain healthy interest rate differentials and help stabilize the peso, import price and inflation.

Nicholas Mapa, ING Bank senior economist in the Philippines, shared the same sentiment.

“This countered to some extent expectations that domestic inflation would revert to target as early as October,” Mapa said in a message sent to the Inquirer.

Last week, the Monetary Board kept the key policy rate at 6.25 percent as expected, citing that the latest baseline projections continue to suggest a gradual return of inflation to the target range of 2 percent to 4 percent over the next two years.

This was the second policy meeting in a row that the central bank kept the overnight borrowing rate unchanged. INQ