Investors stick to inflation-hedging position

THE government raised P5 billion, only a third of its P15-billion offering of Treasury bills (T-bills) on Tuesday as inflation concerns prompted investors to stick to their position to hedge against inflation and, hence, expected monetary policy tweaking.

All tenors across the board capped at higher average yields compared to the secondary market benchmark rates, prompting the Treasury to fully award P5 billion in 91-day T-bills and reject bids for 182-day and 364-day debt papers.

The auction was oversubscribed as total bids hit P19.98 billion.

National Treasurer Rosalia V. De Leon said investors weighed in on the country’s rising inflation, especially for April.

Inflation averaged 4.9 percent in April, the highest since December 2018 at 5.2 percent. The inflation rate in March was at 4.1 percent and 4 percent the month before.

De Leon told reporters the surge in April inflation “continues to dampen market sentiment as analysts see inflation as a big headache for the next administration.”

The 91-day T-bills capped at an average yield of 1.531 percent, jumping by 26.9 basis points from the Bloomberg Valuation Service (BVAL) Reference Rate of 1.262 percent. This is also higher by 25.9 basis points from previous auction’s 1.272 percent.

Meanwhile, bids for the 182-day and 364-day T-bills would have averaged 2.165 percent and 2.329 percent, respectively, had the Treasury fully awarded the securities.

These rates would have been higher by 54.1 basis points from BVAL rate of 1.624 percent for the 182-day T-bills and 34.7 basis points than the BVAL rate of 1.982 percent for 364-day T-bills, respectively.

For this month, the Treasury is targeting to raise P200 billion from the domestic debt market.

Since the start of May, the Treasury has so far sold P52.6 billion in government securities. Last month, it earned P164.4 billion from its auction of government securities out of its P200 billion programmed offering.

The government is set to borrow this year a total of P2.2 trillion, of which around 75 percent is expected to come from domestic sources.

As of end-March, the national government’s outstanding debt has hit a new record-high of P12.68 trillion as borrowings continued to pile up as headwinds continued to pummel the Philippine economy.