The Philippine government made only a partial award of the short term securities it offered on Monday, raising 51.12 billion pesos against a 55 billion peso plan even as total tenders reached 92.097 billion pesos, as elevated inflation raised bets of further central bank tightening ahead. Reuters put the award at 808 million dollars at the day’s exchange rate, confirming the peso total.
The shortfall sat entirely in the 35 day cash management bills. The Bureau of the Treasury borrowed 6.12 billion pesos of the 10 billion offered, as bids reached only 7.02 billion pesos, and the one month paper fetched an average rate of 5.81 percent, up 20.3 basis points from 5.607 percent last week, with accepted yields from 5.65 to 6.00 percent. The three regular bill tenors were fully awarded on stronger demand: 20 billion pesos of 91 day bills at an average 6.493 percent, up 5.5 basis points from 6.438 percent, on 36.907 billion pesos of tenders; 15 billion pesos of 182 day bills at 6.719 percent, up 7.3 basis points from 6.646 percent, on 30.55 billion pesos of tenders; and 10 billion pesos of 364 day bills at 6.855 percent, up 9.9 basis points from 6.756 percent, on 17.62 billion pesos of tenders.
Rates on the short term securities have now risen for a twelfth straight week. Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the increase to inflation reaching a near four year high of 7.8 percent in October and to expectations of further tightening by the Bangko Sentral ng Pilipinas, with a strong El Niño raising the risk of further price pressures. The central bank has raised benchmark borrowing costs by a cumulative 125 basis points since April, including a 50 basis point increase last month, and its Monetary Board holds its last meeting of the year on December 17.
The counterweight is growth. Third quarter GDP grew 2.1 percent from a year earlier, the government reported on Monday, below the 2.7 percent median forecast in a BusinessWorld poll and the weakest performance since the pandemic contraction of early 2021. Ricafort said the softer print could temper the need for further tightening if growth remains slow, raising stagflationary risks. A trader quoted by BusinessWorld said the higher bill demand and yields also reflected the illiquidity of the bond being reissued in Tuesday’s auction.
On Tuesday the government auctions 30 billion pesos of reissued 20 year Treasury bonds with a remaining life of three years and six months, first issued on May 27, 2010 and carrying a coupon of 8.75 percent. The Bureau of the Treasury targets 283 billion pesos from the domestic market in November, 168 billion via bills and 115 billion through bonds, against a budget deficit capped at 1.659 trillion pesos, or 5.4 percent of GDP, this year.