By DERCO ROSAL
Interest rates on short-term government debt increased despite a four-year low inflation rate in September, driven by external factors such as rising global oil prices and reduced chances of the US Federal Reserve rate cuts.
At Monday’s auction, Oct 7, the Bureau of the Treasury (BTr) successfully raised P20 billion through Treasury bills (T-bills), with total bids reaching P38,490 billion—almost twice the amount offered.
This week's total bids fell below the P76.345 billion recorded in the previous week.
The Treasury awarded the full P6.5 billion for the 91-day T-bills, as total tenders for this maturity reached P12,220 billion.
The three-month T-bills were priced at an average rate of 5.414 percent, 21.8 basis points higher than the 5.196 percent from the previous auction last week.
As for the 182-day debt papers, the government raised P6.5 billion as planned, with bids for this tenor reaching P12,410 billion.
The average rate for the six-month T-bill also rose to 5.474 percent, marking a significant increase of 46.9 basis points from last week's rate of 5.005 percent.
Lastly, the Treasury successfully borrowed the planned P7 billion through the 364-day debt papers, with demand for this maturity reaching P13,86o billion.
Similarly, for six-month securities, the average rate for the one-year T-bill inched up by 5.3 basis points, from 5.487 percent in the previous auction to 5.540 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 5.115 percent, 5.292 percent, and 5.509 percent, respectively.
Rebounding from last week’s sharp decline, yields on six-month securities surged by 469 basis points, reaching 5.474 percent.
It is also higher than the six-month PHP BVAL yield of 5.292 percent as of October 7, 2024.
Aligning with the trend, the interest rates for the 92-day and 364-day T-bills also inched up compared to similar short-term PHP BVAL yields.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC) attributed this increase to factors such as tensions in the Middle East, rising global oil prices, a weaker peso, and higher U.S. Treasury yields.
Recafort explained that the lower likelihood of U.S. interest rate cuts this year has caused yields to increase, as markets are adjusting after their recent rise.
Stronger U.S. job growth has made investors think the U.S. Federal Reserve is less likely to cut interest rates for the rest of 2024, he said.
As per the economist, this could influence expectations ahead of the Bangko Sentral ng Pilipinas’ (BSP) next rate-setting meeting on Oct 16.