The Bureau of the Treasury (BTr) made a full award of Treasury bills worth P15 billion during its auction on Monday despite higher rates due to expectations of higher inflation for the rest of the year.

BTr offered 91-day, 182-day and 364-day papers valued at P5 billion each. Total tenders amounted to P47.2 billion or more than three times oversubscription.

The Treasury awarded P5 billion for the three-month papers which fetched an average rate of 5.647 percent, up from 5.631 percent recorded in the previous auction on 18 November.

BTr awarded another P5 billion for the six-month papers which posted an average rate of 5.882 percent, higher than the 5.862 percent seen in last week’s auction.

Last, BTr awarded P5 billion in one-year papers which fetched an average rate of 5.905 percent, an increase from 5.871 percent recorded in the previous auction.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the rates reflected investors’ worries about possible higher inflation rates in the next few months due to lower supply of goods, especially food.

“There could be a possible pickup in the headline inflation data due to the effects of the recent storms and weaker peso exchange rate near the record 59.00 that could increase importation costs and overall inflation,” he said.

Weather affects prices

Overall inflation last month rose to 2.3 percent from 1.9 percent in September, according to the Philippine Statistics Authority.

The main growth driver was the prices of food and non-alcoholic drinks which rose to 2.9 percent from 1.4 percent inflation.

“Recent weather disturbances, including typhoon ‘Kristine,’ have posed significant challenges to our food supply and logistics,” National Economic and Development Authority Secretary Arsenio Balisacan said.

For this month, the National Disaster Risk Reduction and Management Council reported typhoons “Nika,” “Ofel” and “Pepito” caused agricultural and infrastructure damage amounting to over P478 million.

Meanwhile, the local currency slightly appreciated last Friday to P58.87 per dollar from P59 per dollar on Thursday, the weakest level for the peso last week based on data from the Bankers Association of the Philippines.

Last Wednesday, the peso already neared the 59 level at P58.91 against the US dollar.

The last time the peso hit the 59 level was September 2022.

These foreign exchange rates were recorded after the Russia-Ukraine war escalated, with the latter’s first attack against Russia using US-made longer-range missiles.

Before appreciating last week, the peso weakened after Russia retaliated by firing a British and French-made intercontinental ballistic missile at Ukraine, the first attack using that weapon after nearly three years.

“Global crude oil prices reached new two-week highs amid geopolitical risks, such as the possible escalation of the Russia-Ukraine conflict,” Ricafort said.

The economist said investors might be taking advantage of the high policy rate of the Bangko Sentral ng Pilipinas which is expected to either pause its policy easing or further cut its rate toward 5.75 percent to grow the economy through higher consumption of goods and services among households and firms.

“There was softer gross domestic product growth data recently that could support another rate cut. BSP Governor Eli Remolona reiterated dovish signals on a possible 25-basis point cut next month,” he said.