Interest rates jump amid Ukraine crisis – Manila Bulletin
Short-term local interest rates accelerated following Russia’s large-scale invasion of neighboring Ukraine.
The Office of the Treasury has rejected all treasury bill maturities, or IOUs, after banks demanded much higher interest rates at the auction on Monday February 28.
The Treasury office faced three headwinds this week, such as rising consumer prices, rising U.S. interest rates and the Ukraine crisis.
If the government had accepted the banks’ offers, the benchmark 91-day Treasury bill rate, which banks use to price their loans, would have risen to 1.490% from 0.899% at the last successful auction. of the three-month IOU on February 21. .
The government was set to sell 5 billion pesos on 91-day treasury bills and the banks were willing to buy 6.07 billion pesos at the last auction in February.
The average six-month Treasury bill rate, meanwhile, was 1.736% higher than 1.157% in the previous successful auction, while the one-year rate also rose to 1.865% from 1.568%. previously.
The treasury office was supposed to auction 10 billion pesos of government paper for the two tenors.
According to sources, the Ukrainian crisis is aggravating inflationary pressures especially oil transmission channels which are putting pressure on the local debt market.
The government “may also see this scenario until there is clarity on the duration of the conflict in Ukraine and until the Fed meeting on March 16,” the source said. “Cash is king and the market holds the cash.”
For March, the Treasury office raised its borrowing plan to 250 billion pesos from 200 billion pesos the previous month despite headwinds.
Of this amount, treasury bills were expected to yield 75 billion pesos, while treasury bonds were expected to yield 175 billion pesos.
Based on Treasury data, 25 billion pesos in treasury bills will come from the 91-day duration, 25 billion pesos from the 182-day duration and 25 billion pesos from the 364-day duration.
Meanwhile, 70 billion pesos in Treasury bonds will be generated over the seven-year term, 35 billion pesos over the three-year term, 35 billion pesos over the four-year term and an additional 35 billion pesos over the duration of 10 years.
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