The Bureau of the Treasury (BTr) made full award of P20 billion in Treasury bills (T-bills) during its auction on Monday posting higher rates across the board after dropping over several days from the central bank’s announcement of lower reserve requirement ratios for private banks and other lenders.

BTr auctioned off 91-day, 182-day, and 364-day papers which drew total bids amounting to P55.1 billion.

The Treasury awarded the full P6.5 billion for the three-month debt papers which fetched an average rate of 5.463 percent, up from 5.444 percent recorded in the auction on 14 October.

BTr awarded another P6.5 billion for the six-month papers which had an average rate of 5.731 percent, an increase from the 5.668 percent posted in the last week’s auction.

BTr also fully awarded P7 billion for the one-year papers which fetched an average rate 5.686 percent, higher than the 5.623 percent seen in the previous auction.

Higher yields

Rizal Commercial Banking Corp. chief economist Michael Ricafort said investors asked for higher yields after dropping for several days, triggered by the announcement of the Bangko Sentral ng Pilipinas to impose lower reserve requirement ratios (RRR) across all types of banks and lending institutions starting 25 October.

“Treasury bill average auction yields corrected higher for the third straight week after the sharp declines in the two weeks since the RRR cuts were announced last month,” he said.

Lower RRR levels allow individuals and businesses to borrow more funds at cheaper costs, enabling them to secure cash flows for various purposes.

Still wary of inflation risks

Ricafort added investors are still wary of inflation risks as BSP Governor Eli Remolona Jr. said the central bank will be taking a gradual approach in easing its policy rate due to possible higher oil and utility prices and minimum wages for workers outside Metro Manila.

However, Ricafort said oil prices might remain under control as Israel announced a less destructive response to Iran’s recent missile attacks on 1 October.

“Israel reportedly signaled that it would not target Iran’s oil and nuclear facilities should there be any retaliation,” the economist said.

Remolona said the BSP is open to cutting its policy rate by another 25 basis points in December, bringing it down to 5.75 percent.

He said inflation this year could hit 3.1 percent or within the central bank’s target of 2 to 4 percent.

However, Remolona said inflation might increase slightly to 3.3 percent next year and 3.7 percent in 2026 partly due to higher global oil prices.