T-bill, bond rates surge after BSP’s off-cycle hike

Philippine Tribune
Philippine Tribune

Louise Maureen Simeon – The Philippine Star

November 1, 2023 | 12:00am

The Bureau of the Treasury yesterday partially awarded short-term T-bills but rejected all bids for long-term T-bonds as investors demanded rates that are beyond what the government can offer.

Bureau of the Treasury FB page

MANILA, Philippines — Yields for the government’s short and long-term securities jumped across the board after the Bangko Sentral ng Pilipinas (BSP) delivered an off-cycle rate hike, bringing the benchmark interest rate to a fresh 16-year high.

The Bureau of the Treasury yesterday partially awarded short-term T-bills but rejected all bids for long-term T-bonds as investors demanded rates that are beyond what the government can offer.

The Treasury conducted a double auction ahead of the long weekend. The T-bills and T-bonds auctions were the first for the month of November.

Total securities raised was P12.75 billion, which is just 28 percent of the combined P45 billion target.

Rates rose significantly for all tenors as the market reacted to the decision of the BSP to take an off-cycle action by hiking rates ahead of its regular schedule three weeks from now.

The BSP delivered a 25-basis-point hike, which brought the benchmark rate to 6.50 percent, the highest in 16 years.

Economists are also not dismissing the possibility that the BSP could further tighten during its next meeting on Nov. 16.

The central bank is awaiting the latest inflation data for October as well as the third quarter economic performance, which would all be released before its meeting.

During yesterday’s auction, rates across the board went up from secondary markets and the previous week’s auction, prompting the Treasury to only fully award the three-month tenor. The six and 12-month offers were both partially awarded.

Total T-bills raised was P12.75 billion. This marks the fifth straight T-bills auction that the Treasury failed to raise its intended amount of P15 billion.

This was also a deterioration from last week’s T-bills on offer, wherein the government partially awarded P14.26 billion.

Rates for the 91-day T-bills soared by 23.6 basis points to 6.343 percent. This is a pickup from last week’s rate of 6.149 percent and way above the secondary rate of 6.107 percent.

Similarly, the 182-day short-dated debt papers saw rates increase by 21.1 basis points to 6.462 percent from the reference rate of 6.251 percent and up from last week’s 6.33 percent.

Likewise, rates averaged 6.592 percent for the 364-day T-bills, 8.6 basis points higher than the secondary rate and also up from last week’s auction rate of 6.479 percent.

Of the three tenors, only the 91-day security was fully awarded at P5 billion. The 182 and 364-days were both partially awarded at P3.95 billion and P3.8 billion, respectively.

Overall demand for the short-term securities declined six percent week-on-week. Total bids reached P21.941 billion, oversubscribing the auction by just 1.462 times.

By tenor, bids for the one-year decreased to P7.695 billion but picked up to P7.836 billion and P6.41 billion for the three and six month tenors, respectively.

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