THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday even as the papers fetched higher rates due to market expectations of a quicker rise in the consumer price index.

The Bureau of the Treasury (BTr) raised P20 billion as planned from the T-bills at yesterday’s auction as demand amounted to P41.052 billion, more than double the amount on offer but lower than the P50.051 billion in bids seen last week.

Broken down, the Treasury borrowed the programmed P5 billion via the three-month debt papers, even with total tenders dropping to P7.595 billion from P12.613 billion a week ago. The 91-day papers’ average rate increased by 16.5 basis points (bps) to 1.04% from the 0.875% in the previous auction.

It likewise raised P5 billion as planned from the 182-day T-bills from total bids of P8.462 billion, down from the P13.127 billion seen last week. The tenor’s average rate stood at 1.226%, going up by 15.9 bps from 1.067% previously.

Lastly, the government made a full P10-billion award of the 364-day debt papers on offer which attracted P24.995 billion in demand, higher than the P13.127 billion logged a week ago. The one-year tenor’s average rate was at 1.68%, climbing 15.3 bps from the 1.527% seen a week ago.

A bond attributed the rise in T-bill yields to concerns over faster inflation, which was reflected in the jump in the rates of the three- and six-month papers.

Headline inflation likely breached the central bank’s target for a second straight month in February as food and fuel prices remain elevated, according to economists.

A BusinessWorld poll of 16 analysts last week yielded a median estimate of 4.8%, near the upper end of the 4.3% to 5.1% estimate range given by the Bangko Sentral ng Pilipinas (BSP) but beyond the 2-4% annual target.

If realized, the median will be quicker than the 4.2% in January and the 2.6% a year earlier. It would also be the quickest since 5.1% print in December 2018.

The central bank expects inflation to average at 4% this year.

The Philippine Statistics Authority will report February inflation data on March 5.

BSP Governor Benjamin E. Diokno last week said inflation is likely to breach their goal until the third quarter of 2021 due to supply-side pressures before decelerating to the midpoint of the 2-4% target by the fourth quarter.

Mr. Diokno has said they will remain accommodative to support the economy towards recovery, noting raising rates is “too early” at this point.

The Monetary Board is set to meet on March 25 for its second policy meeting for the year.

The BSP last year slashed rates by a total of 200 bps to provide support to the virus stricken economy. This brought down the overnight reverse repurchase, lending, and deposit rates to record lows of 2%, 2.5%, and 1.5%, respectively. — L.W.T. Noble

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