Gov’t fails to raise full P35B from Treasury bonds

The government fell short of borrowing P35 billion through the offering of Treasury bonds (T-bonds), raising only P22.85 billion as lenders asked for high yields while they anticipate further increases in the benchmark rates of the Bangko Sentral ng Pilipinas (BSP).

The offering was a re-issue of seven-year T-bonds that debuted in April 2018, which now have a remaining life of two years and six months.

The auction’s results sent the average yield rising by 75.2 basis points (bps) to 5.746 percent from 4.994 percent in the previous auction.

If the P35-billion offer were fully awarded, the rate would have gone up by 90.4 bps to 5.898 percent.

The resulting average was higher than prevailing rates for three-year bonds at the secondary market—by 19.5 bps over the 5.551 percent for corporate bonds and by 44.8 bps over the 5.298 percent for government securities.

Rate hike expected

“The market continues to provide cushion as high inflation remains persistent,” National Treasurer Rosalia de Leon told reporters. “That being the case, the Bangko Sentral ng Pilipinas is expected to deliver another rate increase.”

The Philippine Statistics Authority will announce inflation numbers for September today, Oct. 5. This was pegged at 6.3 percent in August, but the inflation-herder BSP believes the September readout settled within the range of 6.6 percent to 7.4 percent.

In a commentary issued last week, Fitch Solutions noted that when the Monetary Board announced on Sept. 22 a 0.5-percent policy rate hike, it acknowledged the need for follow-through action to anchor inflation expectations and prevent further price pressures from becoming further entrenched.

Similarly, DBS Bank said the BSP policy rate would reach 5 percent by the end of this year—hiking by 0.5 percentage point (ppt) in November and 0.25 ppt in December—from 4.25 percent currently. INQ