Philippines’ Bill Sale Fails After Second Interest-Rate Increase This Year
The Philippines failed to complete a Treasury bill auction for the first time in two months as demand cooled after the central bank’s second interest-rate increase this year.
The government rejected all bids for the 182-day and 364- day bills today because the yield was too low, the first such failure since March 15. The Bureau of the Treasury sold 1.4 billion pesos ($32 million) of 91-day notes at 1.889 percent, compared with a record low 0.568 percent at an auction on May 2.
Bangko Sentral ng Pilipinas raised its benchmark interest rate for a second consecutive meeting on May 5, increasing the overnight borrowing rate by a quarter-of-a-percentage point to 4.50 percent. China had its first debt sale failure in 2011 last week after a fifth increase in lenders’ reserve-requirement ratios this year.
“It’s about time short-term rates go up given the inflation pressures and the possibility of another rate increase,” said Yvette Marquez-Carlos, who helps manage the equivalent of $11 billion at BPI Asset Management in Manila. “Some government securities will probably need to align the rates accordingly with the central bank,” she said.
The central bank’s special deposit one-month rate pays 4.6875 percent, more than twice the yield on the Treasury’s 91- day bills.
‘Loose Change’
Inflation accelerated to 4.5 percent in April from a year earlier, the fastest pace in 12 months. Consumer-price gains may breach 5 percent in some months this year, central bank Assistant Governor Cyd Amador said on May 13. The nation will assess whether the rate increases have anchored price expectations in the weeks before the next policy meeting on June 16, she said.
Inflation risks “are tilted to the upside,” Governor Amando Tetangco said in an interview with ABS-CBN News Channel last week.
The Treasury rejected bids today to prevent the 182-day rate and the 364-day rate from climbing to 2.382 percent and to 3.294 percent. Demand for the notes was below the 3.5 billion pesos and 4 billion pesos of the respective debt on offer.
“If we accepted those, we will be getting loose change,” Treasurer Roberto Tan told reporters after the auction. “There’s an unsettled view on where the rates should be,” he said.
To contact the reporter for this story: Clarissa Batino in Manila at cbatino@bloomberg.net.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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