Domestic interest rates still have not caught up with inflation to encourage households and businesses to set aside a portion of their income for the proverbial rainy day, based on latest data from the Bureau of Treasury (BTr).
The real interest rate as of latest remain negative, providing no compulsion for savers across the $305-billion economy precious little incentive to save.
At the auction of Treasury bills (T-bills) on Monday, the 91-day lending benchmark averaged 6.3 basis points lower to 2.176 percent, significantly lower than inflation averaging 2.8 percent in the June prices survey.
What this means for the average Filipino household is increased pressure to spend rather than to save, as the purchasing power of the peso is that much more diminished or eroded
by inflation.
Still, National Treasurer Rosalia V. de Leon was very happy with the auction results, as investor appetite for short-dated government securities has returned, allowing the BTr to award each tenor offering in full.
“We see again the appetite of the market, given that it’s on the short end of the curve,” de Leon said.
She particularly noted the full appetite for the short-dated government IOUs came in the wake of the release of the minutes of the US Federal Open Market Committee (FOMC), and indications that interest rates in the world’s largest economy were to rise more moderately over time.
The FOMC indications were boosted by similar signals from the Bangko Sentral ng Pilipinas that domestic interest rates were under no compulsion to rise as well.
“The Central Bank said there’s no pressure to raise rates,” de Leon told financial reporters.
The auction committee awarded the full P6 billion for the 91-day T-bills receiving more than double tenders totaling P15.801 billion, forcing a rejection of P9.801 billion.
The 91-day T-bill rate was 1.3 basis points lower to 2.176 percent from 2.189 percent at the previous auction.
“Also, the survey of economists on the inflation path was still below 3-percent. I think the market is pricing there will be a very muted inflationary environment. There’s no compelling reason to raise rates at this time,” de Leon said.
The auction committee also sold all P5 billion worth of 182-day IOUs that attracted tenders reaching P7.940 billion and forcing a rejection of P2.940 billion. The six-month paper averaged 3.3 basis points higher to 2.529 percent, from 2.496 percent at the previous auction.
“Of course, preference is still on the short end given that the US also sounded they will soon start unwinding its bond holdings,” she added.
The 364-day tenor was also awarded in full at P4 billion, with tenders doubling to reach P8.178 billion. A total of P4.178 billion was rejected. The one-year paper averaged 2.972 percent, which was lower by 2.3 basis points from 2.995 percent at the previous auction.
“Average rates came in below secondary market levels across all tenors amid healthy market demand.
The T-bill auction was more than twice oversubscribed, attracting total tenders of P31.9 billion compared to the P15-billion initial offering,” the BTr said.
With a report by Rea Cu