BTr: Investors hedge vs BSP rate hike

THE Bureau of the Treasury fully rejected bids for reissued 3.5-year Treasury Bonds (T-bonds) as investors continued demanding higher yields on the back of rate hike expectations.

With three years and five months to maturity, the security would have fetched an average rate of 5.592 percent had it been fully awarded.

This is beyond the benchmark secondary market rates of 5.203 percent for the 3-year tenor, 5.455 percent for the 4-year tenor and 5.199 percent for the security itself.

However, the auction was oversubscribed with total tenders reaching P40.7 billion.

National Treasurer Rosalia V. De Leon said investors are factoring in a possible rate hike from the Bangko Sentral ng Pilipinas.

“Demand still good but rates provided excessive buffer anticipating Fed hawkish rhetoric and expectation MB [Monetary Board] may continue higher rate hikes,” De Leon told reporters after the auction.

Earlier, Chairman Jerome Powell signaled the US Federal Reserve would remain hawkish as the world’s largest economy wrestles with inflation that rose to 8.5 percent in July, albeit lower than expected.

Locally, inflation rate slowed to 6.3 percent in August from the 6.4 percent recorded in July, data released by the Philippine Statistics Authority last Tuesday showed. Nonetheless, last month’s figures remained higher than the 4.4 percent posted in August 2021.

Year-to-date, inflation averaged 4.9 percent, still beyond the government’s target band of 2 percent to 4 percent.

Following the August inflation data release, the Bangko Sentral ng Pilipinas (BSP) expressed readiness to take further policy actions to bring inflation within target.

The BSP recently raised its main benchmark rates by another 50 basis points as it expects the inflation rate to reach 5.4 percent for this year, higher than its previous forecast of 5 percent.

For this month, the Treasury is set to borrow P200 billion from the local debt market in September, of which P140 billion will be through Treasury Bonds and another P60 billion from T-bills.

This year, the government is set to borrow a total of P2.21 trillion, of which 75 percent will be sourced locally while the remaining 25 percent will come from foreign sources.

As of end-July this year, the national government’s outstanding debt has soared to a new record-high of P12.89 trillion, an increase of P96.09 billion or 0.8 percent during the first month of the Marcos administration from P12.79 trillion as of end-June.

The country’s debt-to-GDP ratio slightly eased to 62.1 percent in the second quarter of the year from 63.5 percent in the first quarter. However, this remained above the internationally-recommended 60-percent threshold for a healthy economy.


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