YIELDS on Treasury bills (T-bills) climbed to their highest levels in nearly three years last Monday after an underestimated Bangko Sentral ng Pilipinas (BSP) delivered its most aggressive rate hike to date and further showed an unrelenting stance against peaking prices.
The central bank has raised its key policy rate by 50 basis points at its rate-setting meeting last Thursday, with BSP Governor Eli M. Remolona Jr. saying monetary authorities are ‘open to further interest rate hikes.’
Local and foreign analysts expect headline inflation as global oil prices continue to scale higher.
In a Goldman Sachs Exchanges podcast on October 23, Daan Struyven, co-head of Global Commodities Research and head of Oil Research, said that Brent crude oil prices have risen sharply ‘because growing tensions in the Middle East and growing downside risks to supply are leading buyers to bid up barrels, both in the physical market and also on the financial side.’
‘Physical buyers such as refiners are seeing growing downside risks to supply because of an intensification of shipping attacks in the Middle East and because of some strikes on infrastructure by the Houthis,’ Struyven. (See: https://www.goldmansachs.com/insights/goldman-sachs-exchanges/why-oil-prices-are-surging-despite-recovering-supply).
Revised forecast
MEANWHILE, at the Monetary Board’s meeting last week, the BSP revised its 2027 inflation forecast upward from 5.4 percent to 6 percent. (Read more: https://businessmirror.com.ph/2026/10/24/weather-woes-may-extend-bsp-tightening-into-h1-27/)
The BSP’s tightening cycle will likely extend into early 2027, as some have penciled in additional rate hikes at the central bank’s upcoming December and February meetings.
Fanning the flames of an impending rate hike is the weakening peso, which dropped to a new record low of P63.95 on Monday, which could lead to higher importation costs and overall inflation, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.
However, raising the key policy rate further would ‘lead to higher financing costs/borrowing costs and could slow down economic/GDP growth,’ Ricafort noted.
Jumps, rise
THE 91-day average yield jumped by 27.2 basis points to 6.264 percent from 5.992 percent in the previous auction last week. The Bureau of the Treasury accepted yields from a low of 6 percent to a high of 6.6 percent.
The 182-day securities fetched an average yield of 6.430 percent, up by 20.1 basis points from 6.229 percent a week ago. Awarded rates ranged from 6.270 percent to a high of 6.550 percent.
Average yield on the 364-day debt papers rose by 13.9 basis points to 6.583 percent from 6.444 percent previously. Yields ranged from 6.480 percent to 6.6 percent.
T-bill yields increased for the 10th straight week, reaching their highest levels in nearly three years. The 91-day T-bill yield was at its highest since November 6, 2023, when it reached 6.352 percent.
The 182-day tenor likewise posted its highest yield since November 13, 2023, when it stood at 6.513 percent, while the 364-day note was at its highest since November 6, 2023, when it hit 6.591 percent. Total tenders across the three tenors reached P70.679 billion, or 1.5 times the P45-billion offering.
Auction results
RESULTS were mixed after the Treasury fully awarded the 91-day tenor at P20 billion, while it partially awarded the 182-day T-bills at P11.880 billion and the 364-day debt papers at P5.8 billion.
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The Treasury also offered 35-day cash management bills (CMBs), which was fully awarded at P10 billion. The securities fetched an average yield of 5.589 percent, as the Treasury accepted 5.4 percent to 5.7 percent.
On Tuesday, the Treasury will auction 3-year and 10-year Treasury bonds to raise P25 billion and P10 billion, respectively.
The government has already borrowed 87.55 percent, or P2.393 trillion, of its P2.733-trillion financing program for this year.
Next year, the government aims to borrow P3.304 trillion, of which 72 percent will come from domestic sources, while the remaining 28 percent will be borrowed externally.