NextGen Day

The full rejection of bids for the 3.5-year Treasury bond (T-bond) provided by the Bureau of the Treasury (BTr) on Tuesday was caused by investors’ need for high yield.

The debt paper’s key rate would have increased to 5.592 percent from 5.153 percent if the auction committee had fully awarded the debt paper.

The BTr priced the securities at 35 billion PHP, while 40.732 billion PHP in bids were received.

Demand is still strong, but rates have offered an excessive buffer due to the Federal Reserve’s (Fed) hawkish rhetoric and expectations that the Monetary Board may continue raising rates, according to National Treasurer Rosalia de Leon.

As long as inflation in the US and the Philippines continues high, the Fed and the Bangko Sentral ng Pilipinas (BSP) are both anticipated to raise their respective key rates.

For instance, after increasing for the previous five months, the domestic rate of price increases reported a softer reading in August of last year, falling to 6.3 percent from 6.4 percent.

However, the average inflation rate throughout the first eight months of this year was 4.9 percent, significantly higher than the government’s planned range of 2-4 percent.

The BSP stated that while inflation risks are still on the upside, analysts and market participants continue to anticipate aggressive rate adjustment decisions from the Monetary Board, the central bank’s policy-making body (MB).

The Board has raised the BSP’s benchmark rates by 175 basis points so far, emphasizing that the ongoing domestic economic recovery gives the central bank room to raise rates and combat the high inflation rate.

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