Rate hangers-on park funds on short-term debt papers

INVESTORS parked their funds on short-term government securities as they await the next policy rate action from the Central Bank. The Bureau of the Treasury (BTR) sold P15 billion in Treasury Bills (Tbills) on Monday’s auction, which ended up over twice oversubscribed as total bids hit P43.8 billion.

Compared to the benchmark secondary market rates, the average yield for the 91-day T-bills was lower while those for the 182-day and 364-day tenors were higher.

National Treasurer Rosalia V. de Leon attributed the lower yield for the 91-day T-bills due to “overwhelming demand as market wait and see MB [Monetary Board] rate action.”

“[Investors p]arking funds in the meantime. Market also looking for clues whether Fed will pivot or sustain rate hike after payrolls report beat market estimates,” de Leon told reporters.

Bangko Sentral ng Pilipinas Governor Felipe M. Medalla was candor in announcing a rate hike to the tune of either 25 basis points or 50 basis points in the August 18 MB meeting. Medalla reiterated last week that amid the still-rising inflation, the Central Bank is “prepared to take all necessary policy action” to adequately tame inflationary pressures.

Inflation rate in the country in July hit 6.4 percent, the highest since October 2018. That figure brings the Philippines’ average inflation from January to July at 4.7 percent, beyond the government’s 2 to 4 percent target band.

Attracting P18.69 billion in total bids, the 91-day tenor capped an average rate of 1.85 percent, down from the comparable Bloomberg Valuation Service (BVAL) Reference Rate of 2.123 percent.

Meanwhile, the 182-day T-bills’ average rate reached 3.2 percent, above the 2.87-percent BVAL rate.

For the 364-day T-bills, the average yield was at 3.635 percent, higher than the 3.369 percent comparable benchmark for the secondary market.

For this month, the Treasury is aiming to borrow P215 billion through the local debt market next month.

Of the total, 140 billion in Treasury Bonds (T-bonds) and another P75 billion worth of T-bills will be offered.

The Treasury has raised P75 billion since the start of the auction this month.

Former President Rodrigo Duterte ended his term with the national government’s (NG) debt stock soaring to another record-high of P12.79 trillion as of end-june this year.

This was more than double than the P5.948 trillion debt level when Duterte assumed office in mid-2016. By the end of 2019 or a few months before the COVID-19 pandemic hit the country, the national government’s debt stock was at P7.73 trillion.

The national government’s debtto-gdp ratio jumped to 63.5 percent as of the first quarter of this year, above the internationally recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines. It is also the highest since the country’s debt-to-gdp ratio hit 65.7 percent in 2005 under the Arroyo administration.