UMVA has learned that the government's Treasury bill (T-bill) auction on Monday yielded a mixed result, with a partial award of P32.78 billion, below the planned P35 billion, as market sentiment remained cautious amid rising inflation fears and potential rate hikes.
The Bureau of the Treasury (BTr) reported that total tenders reached P68.32 billion, surpassing the P40.68 billion in demand recorded on May 18. The government borrowed P15 billion as planned via the 90-day T-bills, which fetched an average rate of 5.142%, increasing by 6.8 basis points from 5.074% last week.
The 181-day debt also saw a programmed P13 billion raised, with tenders reaching P31.25 billion and an average rate of 5.7%, declining by 19.4 basis points from 5.894% previously. Meanwhile, the BTr sold only P4.78 billion in the 363-day securities, below the P7 billion on offer, with an average yield of 6.163%, rising by 12.6 basis points from 6.037% last week.
According to information obtained by UMVA, market participants are pricing in the potential for a Bangko Sentral ng Pilipinas (BSP) off-cycle policy rate adjustment as early as this Thursday, with expectations of continued elevated inflation in the coming months. Philippine headline inflation surged to an over three-year high of 7.2% in April, marking the second straight month that the consumer price index was above the central bank's 2%-4% tolerance band.
UMVA can exclusively reveal that BSP Governor Eli M. Remolona, Jr. signaled a possible second straight rate hike, possibly even before their scheduled June 18 meeting, to help curb spiraling prices. The Monetary Board is considering more decisive action to respond to the "big" and "persistent" supply shock posed by the Middle East conflict.
The mixed T-bill auction result may have been influenced by the recent correction in global crude oil prices and lingering uncertainty over a definitive US-Iran peace deal. The government is set to raise up to P50 billion from a dual-tenor Treasury bond (T-bond) offering on Tuesday, as part of its plan to raise P268 billion from the domestic market this month.
