The Bureau of the Treasury, or BTr, on Monday partially awarded Treasury bills or T-bills amounting to P14.26 billion, lower than its planned P15 billion, following economists' expectations of elevated interest and inflation rates until next year.

The 91-day, 182-day, and 364-day papers were auctioned off in an equal amount of P5 billion each. The T-bills' total tenders from investors reached P23.359 billion or 1.6 times oversubscribed as average rates increased across the board.

The BTr awarded P5 billion in three-month debt papers which fetched an average rate of 6.149 percent, higher than the 5.990 percent in the auction last week. The papers were oversubscribed, with tenders rising to P7.804 billion.

Slightly oversubscribed

Meanwhile, the BTr made a partial award of the six-month papers at P4.26 billion as their average rate increased to 6.414 percent from 6.207 percent recorded in the previous auction.

These papers were slightly oversubscribed at P5.460 billion in total tenders.

Lastly, the Treasury awarded P5 billion in one-year debt papers which posted an average rate of 6.479 percent, up from 6.388 percent in the previous auction. The long-tenor debt papers attracted the most bids at P10.095 billion.

Ruben Asuncion, chief economist of Union Bank of the Philippines, said the T-bills auction results indicated investors continued to be awash with cash, while the T-bills' rates matched the higher interest rates worldwide.

Looking for higher rates

"Market players are looking for higher rates at par with rising borrowing costs. This has been the case due to high liquidity and rising monetary interest rates," he explained in an email to the Daily Tribune.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation, said investors have been taking advantage of the higher policy rate of the Bangko Sentral ng Pilipinas which it kept steady after two policy meetings amid sticky inflation.

"Treasury bill auction yields also increased in recent weeks to also be better aligned with the key local policy rate at 6.25 percent. However, most Treasury bill average auction yields are now unusually much higher than the comparable short-term PHP BVAL yields in the secondary market," he observed.

Rate hikes due to war

Ricafort attributed the T-bills' rate hikes to the Israel-Hamas war and prospects of persisting high inflation in the US.

"Global crude oil prices were up to 2-week highs recently that could add to inflationary pressures and potential future policy rate hikes amid a potential risk of a wider Israel-Hamas war in the Middle East," the economist warned.

Market players are looking for higher rates at par with rising borrowing costs. This has been the case due to high liquidity and rising monetary interest rates.

BSP Governor Eli Remolona Jr. said the central bank's Monetary Board is considering a rate hike this year due to possible long-term effects of the Israel-Hamas war and lower jobless rate among Filipinos.

Aside from oil prices, Remolona said the BSP is closely monitoring food supply issues, especially with rice as weather disturbances from El Niño are projected to last until the first quarter next year.

"The yields increased also after recent signals about potential risk that the local inflation for 2024 could still be above the inflation target of 2 to 4 percent. There are signals from local monetary authorities that monetary policy decisions will still depend on economic data," Ricafort said.

Keeping an eye 

He added the BSP is also keeping an eye on the policy decisions of the US Federal Reserve whether to match or to  raise local policy rate to attract investments to the Philippines and keep a healthy foreign exchange rate.

Ricafort said most economists believe the Federal Reserve will be keeping its rate elevated until the middle of next year to prevent faster inflation from possible stronger consumption of goods and services due to recent wage hikes among Americans.

"Federal Reserve Chairman Jerome Powell said the bank still left open the possibility of a future rate hike if policymakers saw further signs of resilient economic growth," he said.
"The markets priced in reduced odds of another rate hike to below 50 percent. They priced a start to Federal Reserve rate cuts in July 2024, compared with their opinion in September," Ricafort said.