Treasury bill yields climbed across the board at Monday’s auction as investors appeared to demand higher returns amid surging inflation and uncertainty over the next move by the Bangko Sentral ng Pilipinas.
The increase came after headline inflation accelerated to 7.2 percent in September, matching April’s rate and marking the fastest increase in three years, driven largely by higher food and fuel prices.
The Bureau of the Treasury awarded P40 billion of the P45 billion in T-bills on offer, rejecting some bids for the three- and six-month securities despite total tenders reaching P61.2 billion.
The 91-day T-bill fetched an average rate of 5.845 percent, up from 5.667 percent at last week’s auction. The 182-day paper rose to 6.171 percent from 5.971 percent, while the 364-day bill, which was fully awarded at P10 billion, settled at 6.351 percent, compared with 6.214 percent previously.
The across-the-board increase suggests investors are pricing in greater uncertainty over the inflation outlook and how the central bank might respond, particularly as price pressures have moved well above the BSP’s target range.
The Treasury’s decision to reject some bids also helped keep borrowing costs from rising further, reflecting its flexibility after securing substantial funding from the latest retail bond sale.
Last week, the Treasury raised P167.25 billion in fresh funds from the 32nd tranche of Retail Treasury Bonds, which carries a gross coupon rate of 6.875 percent and a 2.5-year tenor.
The RTBs mature on April 12, 2029.
With the government already having locked in a sizable amount of retail funding, the Treasury had less reason to accept every bid at Monday’s auction, particularly where investors sought noticeably higher rates.
Still, the upward move across all maturities underscores the pressure now building in the local fixed-income market. For investors, the question is no longer simply how much the government will borrow, but how high yields must go to keep pace with an inflation rate that is proving harder to ignore.
