BTr fully allocates P15-B Treasuries for the first time since Putin’s assault on Ukraine

Treasury Office

Treasury Office (From the office’s Facebook account)

MANILA, Philippines — The Bureau of Treasury (BTr) on Monday (April 4) raised 15 billion pesos from short-term treasury bonds — the first full allotment since Vladimir Putin launched his campaign to destroy Ukraine, as a that 91-day benchmark debt the paper has seen auction rates fall.

BTr raised 5 billion pesos each across the three maturities of the treasury bills, which attracted a total of 54.6 billion pesos in bids, making the auction 3.6 times oversubscribed.

National Treasurer Rosalia de Leon attributed the drop in the average three-month IOU rate to 1.38% from 1.587% last week to the positioning of creditors ahead of the yield restriction amid “an faster inflation, expected Fed rate hike and possible Bangko Sentral ng Pilipinas (BSP) rate action in the second half of this year.

Market watchers expect the US Federal Reserve to raise rates by 50 basis points (bps) next time, continuing its 25bp hike policy last month.

On the other hand, the rates for 182 and 364 day IOUs continued to rise. Six-month securities were accepted at 1.781%, compared to 1.607% two weeks ago. One-year Treasury bills reached an annual rate of 1.883%, against 1.792% on March 21.

Last week, the BTr rejected tenders for the two longer maturities, as rates would have risen to more than 2% in the case of 364-day debt.

De Leon attributed the jitters, thus the upside yields sought for longer Treasuries, to the higher inflation forecast above the BSP’s target of 4.3% for 2022, as well as to the impending central bank interest rate hikes.

In a report on Monday, UK think tank Oxford Economics said that alongside the BSP’s planned 50 basis point hike in policy rates this year, domestic bond yields are likely to rise by 110 basis points by the end of the year. end of the year, overtaking the Asia-Pacific region.

In the Philippines and India, “yields could rise further if external financial conditions tighten,” Oxford Economics chief Asia economist Sian Fenner said.

“The negative terms-of-trade shock and rising inflation from higher oil and commodity prices are particularly negative for bond yields in current-deficit economies – India, Thailand and the Philippines. These are some of the largest net importers of commodities in the region and face high risks of pass-through from domestic inflation,” Fenner said. Expensive oil inflates merchandise trade deficit and, in turn, the current account deficit, as the rising import bill would lead to more US dollar outflows outpacing dollar-earning exports.

“We expect further widening current account deficits to put the Philippine peso, Indian rupee and Thai baht under further depreciation pressure over the coming quarters. This will also weigh on bonds,” Fenner said.

Fenner said that while Oxford Economics “expects risk sentiment to improve at the end of 2022, we believe the Philippines will experience the biggest increase in yields – up to a total of 110 basis points. by the end of the fourth quarter of 2022”.

Fenner noted that amid rising 10-year U.S. Treasury yields on market expectations of “more decisive Fed policy tightening,” most Asian bond spreads — except in the Philippines — have narrowed. were shrunken.

On inflation, Fenner said Oxford Economics expects the headline rate in the Philippines and Thailand “to be above 5% year-over-year over the next few quarters.”

TSB

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