NextGen Day

Bids for a seven-year Treasury bond (T-bond) were rejected at an auction on Tuesday due to high yield requirements.

The average rate of the T-bond would have increased to 6.947 percent from 6.740 percent had the auction committee awarded the instruments.

The T-bond was made available by the Bureau of the Treasury (BTr) for PHP35 billion, and a total of PHP62.253 billion in tenders were received.

Rosalia de Leon, the national treasurer, informed reporters that the risk premium in this recently released offering was unreasonably priced by the market.

With impending strong rate hikes, according to De Leon, “the market (is) providing an undue amount of cushion.”

This is happening when central banks raise their benchmark interest rates to help rein in increasing inflation rates.

For starters, since last May, the Bangko Sentral ng Pilipinas (BSP) has raised policy rates by a total of 50 basis points as inflation rose above the government’s goal range of 2-4 percent.

The annual average domestic rate of price increases increased to 4.9 percent last April and then to 5.4 percent in May, bringing it to 4.1 percent.

The impact of rising global commodity prices and domestic supply limits on fish, among other things, may cause inflation to post faster rates in the upcoming months, according to monetary authorities.

Since last March, the Federal Reserve has raised its benchmark interest rates by a total of 150 basis points, and Fed officials have hinted at further tightening to combat the US’s 40-year-high inflation rate.

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