NextGen Day

MANILA, Philippines — Bids for the Philippines’ one-year Treasury bills (T-bills) were rejected on Monday, despite the fact that the debt paper’s interest rate had fallen, due to insufficient demand compared to other tenors, according to the auction committee.

However, due to high demand and a decline in their respective rates, both the three-month and six-month papers were fully given.

If bids for the 364-day paper had been accepted, the rate would have dropped to 2.716 percent from 2.930 percent during the auction on May 23.

The rate on 91-day securities decreased to 1.460 percent, while the rate on 181-day securities fell to 1.812 percent, a day less than the original tenor because its maturity occurs on a holiday.

During the auction last week, these were 1.675 percent for the three-month paper and 1.892 percent for the six-month paper.

BTr offered all tenors for PHP5 billion each, with total tenders of PHP22.341 billion for three-month T-bills, PHP14.955 billion for six-month paper, and PHP5.580 billion for one-year paper.

In a Viber message to journalists, National Treasurer Rosalia de Leon stated the auction committee “saw rates decrease amid solid demand and compressed bids close to secondary levels.”

“In contrast, outright rejection for the 364-day with weak demand and unsatisfactory rates as the market provides buffers for rate advances as foreshadowed by the BSP (Bangko Sentral ng Pilipinas) and another aggressive 50 bps (basis points) by the Fed (Federal Reserve) to cool down inflation,” she added.

After noting the sustained recovery of the home economy and the supply-side component in the domestic inflation rate’s acceleration, the BSP’s policy-making Monetary Board (MB) raised the central bank’s benchmark rates by 25 basis points this month.

The BSP’s overnight reverse repurchase (RRP) rate increased to 2.25 percent from a record low of 2%.

The rate hike is the first since December 2018, and it comes after the BSP’s benchmark rates were cut by 200 basis points in 2020 as part of the central bank’s pandemic-related actions.

Governor of the BSP Benjamin Diokno previously stated that the MB is open to another rate hike by June.

Since the 25 basis point hike in March, which was also the first since December 2018, the Fed’s benchmark rates have been lifted by a total of 75 basis points.

The rise is part of the Fed’s effort to cool the country’s rising inflation rate, which hit a four-decade high of 7.5 percent in January and then surged to 7.9 percent, 8.5 percent, and 8.3 percent in the next three months.

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