Interest rates on short-term government debt continued to increase, driven by a weaker peso and external factors such as rising global oil prices and reduced chances of the US Federal Reserve rate cuts.
At Monday’s auction, Oct 14, the Bureau of the Treasury (BTr) successfully raised P20 billion through Treasury bills (T-bills), with total bids reaching P51.74 billion—nearly three times the amount offered.
This week’s total bids increased from last week’s P38.49 billion, reversing the previous decline.
The Treasury awarded the full P6.5 billion for the 91-day T-bills as planned, with total tenders for this maturity reaching P21.42 billion.
The three-month T-bills were priced at an average rate of 5.444 percent, slightly down by three basis points (bps) from 5.414 percent of the previous week’s auction.
The government raised P6.5 billion as planned for the 182-day debt papers, with bids for this tenor reaching P11.92 billion.
Like last week, the average rate for the six-month T-bill also rose once again to 5.668 percent, up by 19.4 bps from last week’s 5.474 percent rate.
Lastly, the Treasury successfully borrowed the planned P7 billion through the 364-day debt papers, with demand for this maturity reaching P18.4 billion.
Similarly, the average rate for the one-year T-bill inched up by 13.6 bps, from 5.540 percent in the previous auction to 5.623 percent.
Prior to Monday's auction, the PHP Bloomberg Valuation (PHP BVAL) Reference Rates showed that the 91-, 182- and 364-day T-bills were quoted at 5.043 percent, 5.447 percent, and 5.617 percent, respectively.
Notably, interest rates on six-month debt papers continued to increase by 19.2 basis points, reaching 5.668
Additionally, yields on all short-term government securities are “now unusually higher than the comparable PHP BVAL yields” as of October 14, 2024, Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said.
Ricafort linked the increase in yields for the second week to lower expectations of additional Fed rate cuts, a weaker peso, and higher oil prices.
He further explained that the peso has weakened to a two-month low, while global oil prices hit a one-month high amid rising Middle East tensions following Iran's missile attack on Israel.
The Bangko Sentral ng Pilipinas (BSP) rate developments might be influenced by the U.S. Treasury yields hitting new highs amid strong jobs and inflation data.