Short-term benchmark yields rise

Benchmark yields for short-term loans went up after the Bangko Sentral ng Pilipinas (BSP) delivered another large interest rate hike last week.

At Monday's auction of Treasury bills on Aug. 22, the bellwether 91-day Treasury bill rate, which banks use in pricing their loans, rose to 2.070 percent from 1.874 percent last week.

Because of the increase, the Bureau of the Treasury sold only P4.3 billion of the P5 billion worth of three-month debt papers on offer. Investors were asking for P8.27 billion of the government security or IOU.

Yield on the 182-day T-bill also rose to 3.336 percent from the previous 3.226 percent as investors were willing to buy P15.265 billion of the six-month IOUs. The government awarded P5 billion as programmed.

Moreover, interest rate on the one-year IOU has risen to 3.782 percent from 3.712 percent last week.

The one-yield debt papers attracted P7.221 billion worth of bids, and the government awarded only P2.721 billion of the P5 billion on offer.

National Treasurer Rosalia V. de Leon said that bids for higher interest rates were expected following the Monetary Board’s action last Thursday that raised its key policy rates by 50 percentage points.

The forthcoming sale of retail treasury bonds (RTBs) also reduced liquidity in the local market, refueling investor’s estimate for higher interest rates.

The Treasury is set to sell 5.5-year RTB between Aug. 23 and Sept. 2 with a swap offer for bonds expiring on Sept. 13, Dec. 14, Dec. 6 and Feb. 11, 2023.

The bureau already canceled the regular T-bond auctions on Aug. 23.