Treasury bill (T-bill) yields rose across all tenors on Monday, reversing a two-week downtrend, following the Bangko Sentral ng Pilipinas' (BSP) decision to raise its policy rate by 25 basis points to 4.5 percent. The move was aimed at countering inflation risks exacerbated by the prolonged Middle East conflict.
Despite higher yields, the government exceeded its borrowing target, awarding P37.7 billion against a P30-billion offer. Total bids reached P73.5 billion, or 2.4 times the amount on offer, indicating sustained demand.
"Treasury bill average auction yields corrected higher, but still among three-year lows, nevertheless. This was after the latest rate hike and signals of more hikes if the war is prolonged and inflation remains above the 2 to 4 percent target," said Michael Ricafort, chief economist at Rizal Commercial Banking Corp.
BSP Governor Eli Remolona Jr. has signaled the possibility of further modest rate increases to stay ahead of inflation. The central bank's preemptive tightening came as oil price pressures mounted due to ongoing geopolitical tensions.
At the auction, the 91-day T-bill averaged 4.558 percent, up from 4.542 percent. The 182-day tenor rose to 4.737 percent from 4.649 percent, while the 364-day paper climbed to 5.184 percent from 5.052 percent.
For April, the government borrowed a total of P133.2 billion, exceeding the P108-billion target.
The auction results come ahead of key data releases next week: April inflation on May 5 and first-quarter GDP on May 7. Analysts expect inflation to breach the BSP's target range again, while GDP growth may fall short of the government's 5 to 6 percent goal.