T-bill yields up as market digests next BSP move, higher inflation

The Bureau of the Treasury on Monday raised P11.1 billion from the T-bills it offered, albeit capping the rates for the 182- and 364-day IOUs.

Economic managers, meanwhile, also on Monday increased the 364-day treasury bill rate assumption for the period 2018 to 2022 to 3-4.5 percent from 2.5-4 percent previously.

Budget Secretary Benjamin E. Diokno explained that the higher yearly rate assumptions for the one-year debt paper approved by the Cabinet-level Development Budget Coordination Committee (DBCC) reflected the recent rate increases by the Bangko Sentral ng Pilipinas.

The policy rate now stands at 3.5 percent following consecutive adjustments by the BSP’s policy-setting Monetary Board in May and in June. This, as the headline inflation rate already averaged 4.1 percent during the first five months, breaching the government’s full-year target.

During the auction, the Treasury awarded all P4 billion in 91-day T-bills offered at an average rate of 3.404 percent, down from 3.484 percent last week.

Tenders for the three-month T-bills reached P14.4 billion.

The Treasury sold P3.04 billion of the P5-billion offering for 182-day debt paper, as yield further inched up to 3.937 percent from 3.873 percent during the previous auction.

Bids for the six-month government securities amounted to P5.3 billion.

As for the P6 billion in 364-day treasury bills on offer, P4.029 billion were accepted, as the annual rate rose to 4.566 percent from last week’s 4.429 percent.

The one-year T-bills attracted P6.8 billion from investors.

National Treasurer Rosalia V. de Leon told reporters after the auction that the yields for the 182- and 364-day moved up due to expectations that inflation in June would be higher than the over five-year high of 4.6 percent posted in May.

Also, the market also cushioned bets, specifically on the two longer tenors, expecting the BSP needed to again hike interest rates amid a depreciating peso, De Leon said.

“But the auction is still oversubscribed—there is still appetite and we see liquidity in the domestic market,” De Leon added.