Short-term yields up ahead of MB meeting

Published August 15, 2022, 3:13 PM

by Chino S. Leyco

Yields on short-term government borrowings increased as investors expect the Bangko Sentral ng Pilipinas (BSP) to raise key policy rates this week.

At an auction of Treasury bills on Monday, Aug. 15, the bellwether 91-day rate, which banks use in pricing their loans, inched up to 1.874 percent from 1.850 percent last week.

The Bureau of the Treasury sold the P5 billion worth of three-month debt papers on offer. Investors however were asking for P14.61 billion more of the government security or IOU.

Likewise, the yield for the 182-day T-bill rose to 3.226 percent from 3.211 percent previously.

Investors were willing to buy as much as P18.006 billion of the six-month T-bills, but the government only accepted P5 billion worth of bids as planned.

The yield for the 364-day T-bill also inched up to 3.712 percent from 3.635 percent.

Treasury accepted P5 billion worth of bids. Investors, however, were willing to buy more, as tenders reached P7.916 billion.

After the auction, National Treasurer Rosalia V. De Leon said interest rates climbed on all tenors with market expectations that the BSP Monetary Board would to raise rates on Thursday.

“Similarly, US Federal Reserve seems unswayed with softer July CPI [consumer price index] and [Chair Jerome Hayden] Powell remains focused on ‘vanquishing the foe’,” de Leon told reporters.

Most economists expect the central bank to deliver another 50-basis-point rate hike, as monetary authorities remain committed to steer inflation back to the government’s two percent to four percent target range.

Since the start of the year, the BSP lifted rates by 125 basis points, including the huge 75-basis-point increase during an off-cycle rate-setting meeting last July 14.