Lingering concerns over high inflation pushed up the interest rate for long-term Philippine debt papers.
At a Bureau of the Treasury auction on Tuesday, Oct. 5, the yield for the seven-year Treasury bond went up to 4.207 percent from 3.75 percent last August when the IOU was last sold.
Investors were willing to buy as much as P52.79 billion of the T-bonds, but the government only accepted P15.58 billion worth of bids. The Treasury bureau had planned to borrow P35 billion.
“Partial award as rates significantly moved following September inflation print of 4.8 percent,” National Treasurer Rosalia V. de Leon said after the government’s decision to limit its sale of the long-term IOUs.
On Tuesday, the Philippines Statistics Authority reported that inflation slightly eased from 4.9 percent in August, but registered a significant jump compared with the 2.3 percent rise a year ago.
Even as the September inflation settled at the low-end of the Bangko Sentral ng Pilipinas’ (BSP) forecast of between 4.8 percent and 5.6 percent for the month, the first nine months average of 4.5 percent is well above the government’s target of two percent to four percent for the whole year.
“While lower than August and market forecast, inflation is much higher than the high-end of the BSP target,” de Leon admitted.
The central bank said inflation is expected to remain elevated before decelerating to within the target by the end of the year.
The BSP, however, is projecting that inflation would settle close to the midpoint of the two percent to four percent target in 2022 and 2023.
Asked if the Treasury bureau expects the trend of higher interest rates could continue, De Leon said “that will be market reaction.”
The Duterte administration plans to borrow P3 trillion this year, bulk of which will be sourced domestically.
“We have strong cash buffer to allow us to reject if we find bluffs unacceptable,” the national treasurer said.
In October, the Treasury bureau is planning to sell P140 billion worth of T-bills.