Faster inflation expected to lift gov’t debt rates

RATES of government securities are expected to rise this week amid the higher-than-expected inflation data in April.

The Bureau of the Treasury (BTr) will auction off P15 billion in Treasury bills (T-bills) on Tuesday or P5 billion each in 91-, 182- and 364-day securities.

On Wednesday, the BTr will auction off P35 billion in reissued 10-year bonds with a remaining life of four years and 11 months.

“Sentiment for bonds is still sour as market players remain defensive on inflation fears and as Bangko Sentral ng Pilipinas’ (BSP) tightening cycle is about to commence,” a trader said in a Viber message.

Inflation surged to 4.9% in April, the highest in over three years, as soaring food and energy prices continued to hurt consumers. This was quicker than the 4% seen in March.

BSP Governor Benjamin E. Diokno last month said that a rate hike might be considered by June, when more data on economic growth and employment are available to prove that recovery is more entrenched.

Meanwhile, the trader said that rates of T-bills are expected to inch up five to 10 basis points (bps), with the forecast rate of the reissued 10-year bonds between 5.35% and 5.65%.

A second trader via Viber likewise cited the latest inflation data, while adding the higher rates were also due to the aggressive policy tightening of the US Federal Reserve.

Last week, the Fed hiked rates by 50-basis points, the biggest jump in 22 years, which was paired with the trimming of its $9 trillion asset portfolio.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that yields could be higher week on week due to inflation data, recent higher oil prices and a weaker peso-dollar exchange rate.

The peso closed at P52.50 against the dollar on Friday, weaker by 11.5 centavos from the day before.

Meanwhile, oil prices rose nearly 1.5% on Friday, posting a second straight weekly increase as impending European Union sanctions on Russian oil raised the prospect of tighter supply and had traders shrugging off worries about global economic growth, Reuters reported. —