‘Risk aversion’: P25-B in short-dated T-bills sold by Treasury

MANILA, Philippines—The Bureau of the Treasury on Monday (April 5) raised P25 billion from short-dated T-bills as rates went sideways over lingering inflation worries.

The Treasury fully awarded P5 billion in the benchmark 91-day T-bills at an average rate of 1.295 percent, up from 1.269 percent last week.

It also sold P8 billion in 182-day treasury bills at 1.646 percent, up from 1.609 percent previously.

On the other hand, the annual rate for 364-day IOUs declined to 1.912 percent from 1.926 percent during the previous auction as the Treasury awarded all P12 billion it offered.

“Risk aversion drove strong buying interest on haven assets, particularly on the front end with the [March] inflation print seen the same as last [February],” National Treasurer Rosalia de Leon said.

Due to elevated headline inflation, De Leon said investors in government securities “preferred to stay in the short end” of the curve, like treasury bills.

Across the three tenors or maturity periods, bids totalled P67.5 billion, making the auction nearly three times oversubscribed.

De Leon said the Treasury will sell another P5 billion of one-year T-bills to the 11 government securities eligible dealers (GSED) through the tap facility window.

This month’s weekly T-bill offering of P25 billion was bigger than the previous months’ P20 billion.

Most inflation forecasts for March, which the government will report on Tuesday (April 6) were higher than the 26-month high of 4.7 percent recorded in February.

Security Bank Corp. chief economist Robert Dan Roces projected the rate of increase in prices of basic commodities last month at 4.8 percent year-on-year even as food, domestic oil prices and power costs eased.

HSBC Global Research had the same forecast of 4.8 percent, citing that “despite subdued domestic demand due to ongoing lockdown restrictions, global commodity prices remain elevated, likely leading to ongoing price pressures domestically.”

“The good news is that, sequentially, inflation seems to be normalizing after several months of above-trend increases,” said HSBC Global Research.

“If this trend continues, headline inflation will likely remain above the Bangko Sentral ng Pilipinas’ (BSP) target range for most of the year, but largely due to low base effects,” it said.

ING senior Asia economist Prakash Sakpal’s March inflation forecast was 4.9 percent year-on-year.

“The Philippines will take the spotlight for its runaway inflation that has surged past the central bank’s 2-4 percent target and is becoming the main contender against India’s 5.1-percent inflation in February to be the highest in Asia,” said Sakpal.

“Like India, supply shocks to food and transport prices are pushing inflation higher, while demand-side price pressures remain muted amidst rising COVID-19 cases and renewed lockdowns,” Sakpal added.

TSB