Investors continue to seek high yields for longer tenors

THE 75 basis-point rate hike by monetary officials last week pushed investors to demand much higher yields for Treasury bills (T-bills).

Monday’s auction ended up with mixed results as the Bureau of the Treasury decided to fully award P5 billion each for the 91-day and 364day T-bills and partially award P2.9 billion for the 182-day security, allowing it to raise P12.9 billion out of the P15 billion offering.

All tenors fetched higher average yields than the benchmark secondary market rates.

National Treasurer Rosalia V. De Leon said they were not surprised with the market’s reaction to the rate hike by the Bangko Sentral ng Pilipinas (BSP) last July 14.

“As expected, markets asked for higher rates following [the] off-cycle hike by the BSP. Another 50 bps is also now being put on the table as Fed [US Federal Reserve] turns more aggressive with possible full percentage point to be delivered during next FOMC [Federal Open Market Committee],” De Leon said.

The 91-day debt paper fetched an average rate of 2.323 percent, up by 38.2 bps than the Bloomberg Valuation (BVAL) Service Reference Rate of 1.941 percent.

Meanwhile, the auction committee capped the average rate for the 182-day security at 3.083 percent, also higher by 46.6 bps than the comparable secondary market rate of 2.617 percent.

For the 364-day T-bills, the average rate landed at 3.258 percent, 38.7 bps above the BVAL rate of 2.871 percent.

The auction was more than twice oversubscribed, attracting P33.5 billion in total bids.

For this month, the government is set to borrow P200 billion from the local debt market.

As of end-may, the national government’s outstanding debt dipped to P12.5 trillion from a record-high of P12.76 trillion as of end-april due to its repayment of a P300 billion shortterm, zero-interest loan from BSP.