Declining inflation slows Treasury bill rates
At A Glance
- The national government fully borrowed funds through short-term loans.<br>The Bureau of the Treasury awarded a total of P10 billion as planned. Demand for three-month, six-month, and 12-month IOUs reached P72.215 billion.<br>The 91-day Treasury bill rate decreased to 4.753 percent from 6.123 percent in the previous auction.<br>Yield on the 182-day T-bill also decreased to 5.181 percent from the previous 6.513 percent.<br>Interest rate on the one-year IOU dropped to 5.727 percent from 6.560 percent a week ago.
Short-term benchmark interest rates sharply dropped anew, now below the local policy rate of 6.50 percent.
At the Bureau of the Treasury auction on Tuesday, Nov. 28, the national government fully awarded its P10 billion offering. Total demand reached P72.215 billion, more than seven times higher than the offering.
The 91-day Treasury bill rate significantly declined to 4.753 percent from 6.123 percent in the previous auction.
The Treasury sold all P3 billion of three-month debt papers on offer. However, investors were asking for P25.615 billion of government security or IOU.
The 182-day T-bill rate also decreased, down to 5.181 percent from 6.513 percent previously. The government awarded all P3 billion but demands reached P22.380 billion on the offer.
Lastly, there was also a slight decline in the average yield for the one-year T-bills, decreasing from 6.560 percent in the previous auction to 5.727 percent.
The Treasury raised P4 billion by selling 364-day IOUs, higher than the total demand of P24.220 billion on the said offer.
The auction yields this week are also lower compared to the comparable short-term yields in the secondary market, which are partly supported by the continued gains in the international financial markets since early November, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.
Ricafort also said that the downtrend of global oil prices and the strengthening of the peso towards the holiday season would support the continued easing of yields in the secondary market.
“Both of these factors would continue to support the further easing of local headline inflation towards the target of 2 percent to 4 percent, especially if the Israel-Hamas war does not widen/spread in the Middle East,” the chief economist said.
The headline inflation in October dropped to 4.9 percent from 7.7 percent in the same month a year ago.
Meanwhile, the economy, as measured by gross domestic product, recorded a 5.9 percent growth in the third quarter this year, which is faster than the 4.3 percent in the second quarter.
The economy will need to grow by 7.2 percent year-on-year for the fourth quarter of 2023 to attain the lowest end of the target of six to seven percent.