T-bill sale short of target due to Iran war
Spooked by escalating Middle East unrest, investors demanded higher returns on Monday’s sale of Treasury Bills (T-Bills), leaving the government short of its planned offering.
Auction results from the Bureau of the Treasury (BTr) showed that the offering of short-dated securities raised just P19.2 billion out of the P27-billion program.
Although the auction was still 1.2 times oversubscribed, attracting P31.5 billion in total tenders, it was the weakest demand so far among this year’s auctions.
Yields climbed anew after already rising last week—the first increase in seven weeks—when the Middle East conflict had begun pressuring global oil prices.
The 91-day T-bill averaged 4.677 percent, higher than the preceding auction’s 4.311 percent.
Average rate for the 182-day paper also rose to 4.795 percent from 4.417 percent previously, while average yield for the 364-day tenor jumped to 4.849 percent, from 4.564 percent.
“Treasury bill average auction yields corrected higher again after global crude oil prices went up to nearly a four-year high amid the continued war on Iran,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp.
He was referring to oil prices surging past $100 a barrel due to the escalating Iran war.
“These could lead to higher prices and inflation, reduce the odds of future Fed (US Federal Reserve interest) rate cuts, or even prompt potential Bangko Sentral ng Pilipinas rate hikes to fulfill its price stability mandate,” he added.
BSP Governor Eli Remolona Jr. recently signaled that the central bank may need to raise interest rates if oil prices would spike to $100 a barrel, which could push inflation beyond the central bank’s 2 percent to 4 percent target range.
Ricafort said that borrowing costs may continue to rise.
“[The government] should increase the urgency for narrower budget deficits through intensified tax revenue collection and more disciplined spending based on anti-corruption measures,” he said.
