Improved outlook to lower debt paper rates

By Jasper Emmanuel Y. Arcalas @jearcalas

THE Bureau of the Treasury (BTr) foresees interest rates for both Treasury bills (T-bills) and Treasury bonds (T-bonds) on a downward trend in succeeding auctions as a result of the improved outlook on Philippine economy and the pause on policy rates last week.

“We see rates declining as a result of both Fitch [Ratings’s] outlook adjustment to stable and [the Monetary Board] pause on policy rates last week,” National Treasurer Rosalia V. De Leon said last Tuesday.

Last Monday, the credit rating agency Fitch Ratings reaffirmed the Philippines’s current “BBB” credit rating while improving its outlook of the country’s economic performance. (See: https://businessmirror.com. ph/2023/05/23/fitch-sees-phlreturn-to-strong-growth/)

Fitch Ratings revised its outlook on the Philippines’s long-term foreign currency issuer default rating to stable from negative.

Fitch Ratings explained that the revision “reflects” its “confidence” that the Philippines is now “returning” to strong economic growth postpandemic. Meanwhile, the MB kept the prevailing interest rates on the Bangko Sentral ng Pilipinas’s overnight reverse repurchase facility at 6.25 percent.

The BSP noted that maintaining interest rates are expected in the near-term and that monetary authorities are “unlikely to raise [and will also be] reluctant to cut” interest rates at least in the next 2 to 3 policy rate settings. (See: https://business- mirror.com.ph/2023/05/19/bsppauses-interest-rate-hikes-as-inflation-cools-and-consumer-demandeases/) De Leon made the statement after the Treasury’s auction committee decided to fully-award the reissued 7-year T-bonds) on Tuesday as investors’ asking rates were “within secondary-market levels.”

With the full award, the government was able to raise P25 billion with the government securities fetching an average interest rate of 5.774 percent. The secondary market rate for the same debt paper was estimated at 5.681 percent.

“Rates are within secondary level and are even lower than [average] rates of yesterday’s auction,” De Leon said, referring to the T-bills auction last Monday that saw rates averaging between 5.777 percent to 5.945 percent depending on the tenor of the government security.

(Related story: https://businessmirror.com.ph/2023/05/23/btr-bags%e2%82%a715b-from-sale-of-triple-tenor-t-bills/) Tuesday’s auction was oversubscribed as total bids reached P30.625 billion, exceeding the P25-billion offering. Investors’ asking rates for the Tbond auction ranged between a low of 5.648 percent to a high of 5.85 percent.