The Philippine central bank raised P100 billion from its auction of short-term securities on Friday even as rates rose on hints by the US central bank of a looming interest rate increase in 2023.
The Bangko Sentral ng Pilipinas (BSP) fully awarded the 28-day bills from total bids worth P140.525 billion. The auction was 1.4 times oversubscribed, but the demand was 14{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} lower than P162.69 billion in the previous auction.
The debt paper fetched an average 1.811{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4}, up by 1.4 basis points (bps) from 1.797{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} last week.
Yields sought by banks ranged from 1.78{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} to 1.845{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4}, narrower than 1.755-1.87{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} a week earlier.
The continued uptick in local yields may be traced to the US Federal Reserve’s hints that two 25-bp rate increases are likely to happen toward the end of 2023, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.
The possibility of the Fed soon unwinding its bond purchases as the US economy recovers may also have contributed to rising local bond yields.
At its latest two-day meeting, majority of the Federal Open Market Committee members said they expected the Fed to raise its benchmark interest rates twice in 2023.
The Fed also increased its forecast for inflation to 3.4{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} from 2.4{0018ee5a413206d5867d4650a6cb0bf5e2f9c77ab1c1dc5336e75263ef8a33b4} this year amid a bigger-than-expected impact of supply chain disruptions.
Investors are also becoming more cautious about when the Fed will taper its bond purchases, a measure that many central banks adopted to boost market liquidity amid a coronavirus pandemic. — Beatrice M. Laforga