T-bill rates climb across the board

MANILA, Philippines — Yields on short-term government securities rose as expected yesterday following the rate hike pursued by the US Federal Reserve and another impending tightening by the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury yesterday awarded just P10.54 billion of the P15 billion in Treasury bills (T-bills) on offer due to spiking yields across all tenors, although demand reached P22.605 billion or nearly 1.5 times.

The rate for the 91-day T-bills went up by 18.8 basis points to 1.759 percent. The yields for the 182-day paper and 364-day tenor jumped by 19.5 basis points and 25.3 basis points to 2.132 percent and 2.454 percent, respectively.

National Treasurer Rosalia de Leon said investors insisted on yields above average quotation to cover for risks posed by the BSP’s looming response to the Fed’s latest rate hike.

“As expected, markets asked for high premiums to cushion against upward adjustments in rates delivered by Fed to be followed by the Monetary Board to quell rising price pressures,” she said in a text message to reporters.

“While incoming BSP (governor) Felipe Medalla spoke of gradual tightening, some analysts still see a 50-basis-point move following the 75-basis-point hike delivered by the Fed to slash elevated inflation,” she said.

Although the Fed raised its interest rate by 75 basis points, Medalla said the BSP would push through with just a 25-basis-point increase in its policy meeting on Thursday. However, analysts said a 50-basis-point hike is required to keep up with the pace of the Fed’s monetary tightening.

Bank of the Philippine Islands (BPI) said the gap between the benchmark rates of the BSP and Fed would level by the end of 2022 if the BSP hikes by just 25 basis points and the Fed raises by up to 75 basis points every meeting. Under this scenario, the peso will be pressured by the dollar, worsening inflation in major items.

“A very narrow gap between US and local interest rates would likely exert more pressure on the peso, which will eventually translate to more inflation,” BPI said.

According to BPI, the economy has become sensitive to foreign exchange movements after the government decided to address supply shortfalls, especially in food, through importation.