Philippine Treasury bill yields jump as BSP hawkish shift dents demand

Traders Union
All News
Economic Data
Philippine Treasury bill yields jump

Highlights

Treasury bill auction raises P47.68 billion, missing the P55-billion target as average yields rise sharply after BSP's surprise 50-basis-point hike.
The 91-day T-bill yield surges 63.2 basis points to 6.624% with full P20 billion awarded; weaker demand reflects tighter monetary outlook and peso’s record low at P63.95 per dollar.
BSP's hawkish stance responds to mounting inflation risks from higher oil prices and El Niño, with next Monetary Board meeting set for Dec. 17 and government targeting P418 billion in local borrowing for November.

Auction results reflect tighter rate outlook

As reported by BusinessWorld Online, the Bureau of the Treasury raised P47.68 billion from its Monday offering of cash management bills and Treasury bills, below its P55-billion target, even as tenders reached P83.84 billion. Demand also eases from the P92.212 billion in bids recorded a week earlier, while the government partially awards longer Treasury bill tenors to limit the rise in average yields.

The Treasury borrows P10 billion as planned through 35-day cash management bills after attracting P13.161 billion in bids. The paper fetches an average rate of 5.589%, up 31.1 basis points from 5.278% last week, with accepted yields ranging from 5.4% to 5.7%.

For regular Treasury bills, the government raises P37.68 billion, below the P45-billion target, although tenders reach P70.679 billion. It awards the full P20 billion for the 91-day tenor as bids hit P35.869 billion, with the average yield climbing 63.2 basis points to 6.624% from 5.992%. The 182-day tenor draws P23.7 billion in tenders, but the Treasury accepts only P11.88 billion versus the P15-billion plan, while the average yield rises 20.1 basis points to 6.43%. For 364-day bills, the government sells P5.8 billion against a P10-billion target as demand totals P11.11 billion, and the average yield increases 13.9 basis points to 6.583%.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort says in a Viber message that yields on short-term securities surge after the BSP's surprise 50-basis-point hike last week and its more hawkish tone on inflation. He adds that the peso's drop to record lows and elevated global crude prices linked to the prolonged Middle East conflict are reinforcing price pressures and raising the likelihood of additional monetary tightening in the coming months.

A trader says lower demand likely reflects caution in the market as economic uncertainty deepens alongside rising yields and a weaker peso. The BSP raises benchmark rates by 50 basis points on Thursday, bringing the target reverse repurchase rate to 5.5%, the highest in nearly two years and the highest since 5.75% in February 2025.

Inflation risks shape funding conditions

Only two of 22 analysts polled by BusinessWorld predict the half-point increase, while the remaining 20 expect just a quarter-point move. BSP Governor Eli M. Remolona, Jr. says a strong response is needed because inflation may accelerate further, with the Middle East war pushing up oil prices and strong El Niño conditions threatening food supply.

The Monetary Board is set to hold its last meeting of the year on Dec. 17. In the currency market, the peso moves closer to the P64-per-dollar level on Monday after five straight days of record closes, weakening to a new all-time low of P63.95.

The government is scheduled to return to the domestic market on Tuesday with a dual-tenor Treasury bond offering worth P35 billion, including P25 billion in seven-year debt with a remaining life of two years and 11 months and P10 billion in 10-year bonds with a remaining life of nine years and three months. For the month, the Bureau of the Treasury aims to raise P418 billion locally, consisting of P168 billion in Treasury bills and P250 billion in Treasury bonds, as the government funds a budget deficit capped at P1.659 trillion, or 5.4% of gross domestic product, this year.

Our earlier coverage of planned Philippine sovereign bond reforms examined the shift to a new pricing convention for peso government bonds in 2027 and the expected inclusion in J.P. Morgan’s Government Bond Index-Emerging Markets, both aimed at improving comparability, liquidity, and foreign participation. It also stressed that cheaper funding and stronger market performance are not automatic, since outcomes still depend on global rates, exchange-rate expectations, and fiscal credibility. The piece added that broader capital-market deepening and structural reforms are needed for these financial-market upgrades to translate into more productive investment and growth.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.