LEDAC adds 10 more priority measures

The Legislative-Executive Development Advisory Council (LEDAC) identified 10 more bills as priority legislation, including the measures seeking to rationalize the fiscal regime for the mining industry and to amend the public procurement system.

In a statement after LEDAC’s third meeting presided by President Ferdinand R. Marcos, Jr., the Palace said the bill amending the Government Procurement Reform Act and the proposed rationalization of the mining fiscal regime were among the 10 bills added to the common legislative agenda.

The new priority bills also include a measure imposing excise tax on single-use plastics and the proposed amendments to the Cooperative Code and Fisheries Code, the Palace said.

The proposed New Government Auditing Code, Open Access in Data Transmission Act, Defense Industry Development Act, and Philippine Maritime Zones Act were also included in the priority agenda.

Proposed amendments to the Right-of-Way Act were also among the LEDAC’s new 10 priority bills.

Senate President Juan Miguel F. Zubiri said the bills were endorsed by Mr. Marcos’ economic team.

“We committed to support this as well,” he said after the LEDAC meeting, based on the Palace statement.

The Palace said Congress is on track to pass the LEDAC’s top 20 priority bills for this year, including measures amending the Bank Deposit Secrecy Law and Anti-Financial Account Scamming Act.

The two bills, which are still pending at the Senate committee level, had been endorsed by the Bangko Sentral ng Pilipinas (BSP), which aims to remove the Philippines from the Financial Action Task Force’s “gray list” by January 2024.

Another bill proposing changes to the military and uniformed personnel (MUP) pension system, which was approved on second reading by the House of Representatives earlier this week, was also on LEDAC’s list.

Bills targeted for Congress approval by December also include the proposed Property Valuation and Assessment Reform Act, E-Governance Act, Magna Carta for Seafarers, Anti-Agricultural Smuggling Act, and a bill seeking to ease the payment of taxes.

The list also includes bills seeking to rightsize the National Government, create a National Employment Action Plan, institutionalize the automatic income classification of local government units, and develop the salt industry.

The proposed Internet Transaction Act, National Scamming Act, National Citizens Service Training Program Act, New Philippine Passport Act, and proposed amendments to the Build-Operate-Transfer law were also included in the list.

House Speaker Ferdinand Martin G. Romualdez said 18 out of the 20 priority bills were already approved by the lower house.

He said the bill reforming the MUP pension system is slated for approval on third and final reading next week, while the proposed Anti-Agricultural Smuggling Act was already approved at the committee level earlier in the day.

“We are on track to approve the two remaining measures before the October recess,” the House leader said in a separate statement. “In sum, the House of Representatives will meet its commitment to approve all 20 priority measures by the end of September, or three months ahead of target.” — Kyle Aristophere T. Atienza

TDF yields drop before Fed, BSP policy decisions

Yields on the central bank’s term deposits dropped on Wednesday as both tenors were oversubscribed on expectations of a rate pause this week.

The term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) fetched bids amounting to PHP 434.066 billion on Wednesday, well above the PHP 300-billion offering but a tad lower than PHP 446.698 billion for a PHP 340-billion offer seen a week ago.

Broken down, tenders for the seven-day papers reached PHP 263.423 billion, higher than the PHP 180 billion auctioned off by the central bank and the PHP 248.137 billion in bids for a PHP 200-billion offering seen the previous week.

Banks asked for yields ranging from 6.3% to 6.515%, lower than the 6.33% to 6.575% band seen a week ago. This caused the average rate of the one-week deposits to decrease by 6.15 basis points (bps) to 6.4576% from 6.5191% previously.

Meanwhile, bids for the 14-day term deposits amounted to PHP 170.643 billion, beyond the PHP 120-billion offering but failing to beat the PHP 198.561 billion in tenders for a PHP 140-billion offer seen on Sept. 13.

Accepted rates for the tenor were from 6.3275% to 6.525%, also lower than the 6.34% to 6.58% margin seen a week ago. With this, the average rate for the two-week deposits fell by 3.64 bps to 6.4863% from 6.5227% logged in the prior auction.

The BSP bank has not auctioned 28-day term deposits for more than two years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the 28-day bills are used by the BSP to mop up excess liquidity in the financial system and to better guide market rates.

Term deposit yields went down ahead of the widely expected pause from both the US Federal Reserve and the BSP at their meetings this week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The US Federal Reserve was set to announce overnight its policy decision after a two-day meeting.

The Fed hiked borrowing costs by 25 bps at its July meeting, bringing its target rate to 5.25-5.5%, the highest level in 22 years.

Meanwhile, the Monetary Board will hold its own review on Thursday, where it is likely to keep rates steady for a fourth straight meeting, according to 14 of 17 analysts in a BusinessWorld poll last week.

Mr. Ricafort said headline inflation could fall within the 2-4% target by the fourth quarter or in the first quarter of 2024 due to a high base, which would be a key factor in the BSP’s decision making.

The country’s headline inflation rose to 5.3% in August from 4.7% in July. It marked the 17^th straight month inflation breached the central bank’s 2-4% target.

For the first eight months, inflation averaged 6.6%, still above the BSP’s 5.6% forecast. — K.B. Ta-asan

Treasury bureau looking to issue tokenized bonds within the year

The Bureau of the Treasury (BTr) is looking to conduct a pilot test of tokenized bonds among government securities eligible dealers (GSED) within the year.

The BTr has not decided on the issue size, Deputy Treasurer Erwin D. Sta. Ana told reporters on Wednesday, but is looking at offering smaller denominations.

He said the denominations for the tokenized bonds could be lower than the PHP 5,000 minimum investment for retail Treasury bonds.

Tokenized bonds are exchanged digitally through a blockchain.

The tokenized bonds use a value known as a token to take the place of the securities’ sensitive data and secure them.

Mr. Sta. Ana said in a speech at the Advancing the Philippines Bond Market Conference 2023 held on Wednesday that the BTr is working on issuing a total of two tokenized bonds.

The BTr is conducting an internal study on the tokenized bonds with inputs from government financial institutions to potentially implement tokenization for retail bonds and attract more digital investors.

“We’re currently studying it. We did the study to initially pilot it with institutional investors, with our GSEDs, and possibly the government institutions. Later on, once the proof of concept is okay, then we can venture into retail,” Mr. Sta. Ana said.

“We’d like to roll it out first to the institutional investors and then later on, to harness what this technology offers, which is to further enable fractional shares in terms of onboarding more digital investors,” he added.

He said that the BTr will announce the pilot tokenized bond offering soon.

The BTr is also planning to issue a sukuk and a retail dollar bond before the end of the year, he added.

“The BTr is trying to introduce Sukuk bonds through the LGU (local government unit) bonds financing framework. We have launched this as well. We have been speaking with LGU executives. We have seen interest from at least three, five first-class cities, so efforts are on the way,” Mr. Sta. Ana said.

The Sukuk bond issue would mark the Philippines’ debut in the Islamic bond market.

National Treasurer Rosalia V. de Leon said last week that the securities could be issued before the end of the year or in the first quarter of 2024. — A.M.C. Sy

PH urged to expand presence in global bond market

The Philippines should further diversify its borrowing sources and expand its presence in the global bond market, analysts said.

“Given the country’s credit rating and its commitment to pursue its infrastructure program. Definitely, the government can still expand its borrowings,” Jonathan L. Ravelas, senior adviser at professional services firm Reyes Tacandong & Co., said in a text message.

Last week, National Treasurer Rosalia V. de Leon said that the government is looking to issue Islamic bonds or Sukuk bonds by yearend or 2024. This would mark its first issuance in the Islamic bond market.

“The Philippine government’s plan to debut in the Islamic bond market with a Sukuk issuance is a strategic move that could diversify its investor base and potentially offer more favorable terms. Coupled with its USD 5-billion program for commercial bonds, the government is evidently keen on robust external financing,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

This year, the government’s borrowing plan is set at USD 2.207 trillion, consisting of PHP 1.654 trillion from domestic sources and PHP 553.5 billion from foreign sources.

The government is planning USD 5 billion (around PHP 283 billion) in global bonds this year.

In January, the Philippines already raised USD 3 billion from its first US dollar bond issuance for the year.

Mr. Roces said it could be beneficial to expand borrowing options beyond commercial and Sukuk bonds.

“Markets like Euro bonds and Samurai bonds offer low-interest rates, while green bonds could attract investors focused on sustainability,” he said.

The government, under President Rodrigo R. Duterte, had raised euro 2.1 billion (PHP 122.4 billion) from a triple-tranche offering of euro-denominated bonds in April 2021. In April 2022, it raised 70.1 billion Japanese yen from a four-tranche Samurai bond offer.

Mr. Roces said the sustainability of this borrowing strategy “will be a function of the country’s overall debt level and fiscal health, which remain manageable.”

The government had ramped up borrowings at the height of the coronavirus pandemic. As of end-June, the National Government’s outstanding debt as a share of gross domestic product stood at 61%, lower than 62.1% from the same period a year ago.

However, it is still slightly above the 60% threshold considered by multilateral lenders to be manageable for developing economies.

“Diversifying borrowing sources should help mitigate risks and provide balance in the financial portfolio. Also, given the global dominance of the US dollar, the US market offers significant liquidity. However, it does come with currency risks given the current environment,” Mr. Roces said.

The government is still targeting a US-denominated retail Treasury bond offering by the end of the month.

“I think the plan to borrow retail dollar bonds is a good way to tap our overseas Filipino workers (OFWs) who may lack access to good investment outlets for their hard-earned money,” a trader said in a text message.

“It is always good for the government to have different borrowing sources. However, I think the BTr will still have to source more borrowing locally given the domestic liquidity,” the trader added.

The government’s borrowing mix favors domestic sources (75%) in order to mitigate foreign currency risk.

Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila, said domestic borrowings are still the safer option.

“Borrowing in foreign debt is generally carried out to take advantage of lower borrowing costs abroad or to deepen the market for Philippine debt. Despite the ability to borrow in foreign currency, the bulk of the borrowing remains domestic in nature in order to safeguard against too much currency and interest rate risk,” he said in a Viber message.

“Currently, the Philippines is awash with cash and perhaps borrowing in local currency will still not result in a substantial tightening of financial markets,” he added.

Mr. Mapa also said that the country’s investment grade status could also help offset high interest rates.

“Rates, however, are relatively high and there remain uncertainties regarding exchange rates and policy direction. Despite this, given our investment grades status, the Philippines may still be able to secure debt at relatively affordable rates,” he added.

The Philippines’ credit rating is currently above the minimum investment grade across three major debt watchers, with S&P Global Ratings at “BBB+,” Fitch Ratings at “BBB,” and Moody’s Investors Service rating the country at “Baa2.” — By Luisa Maria Jacinta C. Jocson, Reporter

BTr makes full award of reissued 10-year T-bonds at lower yields

The government made a full award of the reissued Treasury bonds (T-bonds) it offered on Monday at a lower rate due to market expectations that the Bangko Sentral ng Pilipinas (BSP) will keep borrowing costs steady at its policy meeting this week.

The Bureau of the Treasury (BTr) raised PHP 30 billion as planned via the reissued 10-year bonds it auctioned off on Tuesday as total bids reached PHP 66.719 billion or more than twice the amount on offer.

The bonds, which have a remaining life of nine years and 11 months, were awarded at an average rate of 6.42%, with accepted yields ranging from 6.35% to 6.448%.

The average rate of the reissued bonds was 13.8 basis points (bps) lower than the 6.558% quoted for the papers when they were last offered on Aug. 15. It was also 20.5 bps below the 6.625% coupon for the series.

The average rate was likewise 2.1 bps lower than the 6.441% quoted for the 10-year bond, but 0.3 bp above the 6.417% seen for the same bond series at the secondary market before Tuesday’s auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded the reissued 10-year Treasury Bonds at today’s auction. With a remaining term of 9 years and 11 months, the reissued bond series 10-71 fetched an average rate of 6.420%, lower than the original coupon rate of 6.625% set on its original issuance in August 2023,” the BTr said in a statement on Tuesday.

“The auction was 2.2 times oversubscribed with total tenders reaching PHP 66.7 billion. With its decision, the committee raised the full program of PHP 30 billion, bringing the total outstanding volume for the series to PHP 60 billion,” it added.

The T-bonds fetched lower yields as the BSP is widely expected to keep its policy rate steady this week, a trader said in an e-mail.

A BusinessWorld poll conducted last week showed 14 of 17 analysts expect the Monetary Board to maintain the policy rate at a near 16-year high of 6.25% at its meeting on Thursday.

However, three analysts see the BSP raising borrowing costs by 25 bps at their meeting as a preemptive measure due to growing inflationary pressures. This would bring the policy rate to 6.5%.

The central bank raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation, but has since paused for three consecutive meetings.

T-bond yields declined due to the recent maturity of government securities worth more than PHP 140 billion, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The maturity added to the excess liquidity in the financial system, resulting in higher demand for investment alternatives with higher returns, he added.

The BTr wants to raise PHP 180 billion from the domestic market this month, or PHP 60 billion via Treasury bills and PHP 120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — A.M.C. Sy

Banks’ trust assets rise at end-June

The Philippine banking industry’s trust and other fiduciary businesses rose by 10% year on year to PHP 4.06 trillion as of end-June, data from the Bangko Sentral ng Pilipinas (BSP) showed.

This was higher than the PHP 3.66 trillion in the same period in 2022 and 2.7% above the PHP 3.95 trillion in the previous quarter.

A trust business refers to any activity from a trustor-trustee relationship wherein a trustee is appointed by a trustor to administer, hold, and manage their funds and/or properties to the benefit of the trustor.

Banks or nonbank institutions such as investment houses can be designated to have a business unit to perform trust functions.

The trust industry’s assets include investments in securities and bank deposits.

BSP data showed cash and due from banks climbed by 38.7% to PHP 469 million in the first half of the year from PHP 338 million in the comparable year-ago period.

Total deposits in banks grew by 44.2% to PHP 1.07 trillion in the first semester from PHP 742.6 billion last year.

Meanwhile, net financial assets slipped by 0.4% to PHP 2.41 trillion as of end-June from PHP 2.42 billion a year earlier.

Total loans, which includes gross equity investments, also dipped by 0.13% to PHP 76.69 billion from PHP 76.79 billion in 2022.

Under total accountabilities, trusts holdings stood at PHP 1.43 trillion in the first half, 13.3% lower than the PHP 1.65 trillion a year ago.

Broken down, unit investment trust funds fell by 41.2% to PHP 495.24 billion in the January-to-June period from PHP 841.72 billion last year.

Employee benefits went up by 11.7% to PHP 353.03 billion year on year, while pre-need rose by 8% to P91.81 billion.

Agency trusts under total accountabilities climbed by 33.7% to PHP 2.02 trillion from PHP 1.51 trillion while other fiduciary services rose by 12.9% to P610.81 billion from PHP 540.74 billion a year prior.

The universal and commercial banks managed PHP 4.036 trillion of these trust holdings while thrift banks held PHP 27.62 billion. — K.B. Ta-asan

Peso rebounds as Fed seen to keep rates steady

The peso rebounded against the dollar on Tuesday on expectations that the US Federal Reserve would keep benchmark rates steady for the rest of the year.

The local currency closed at PHP 56.755 versus the dollar on Tuesday, strengthening by 11.1 centavos from Monday’s PHP 56.866 finish, data from the Bankers Association of the Philippines’ website showed.

The local unit opened Tuesday’s session stronger at PHP 56.71 per dollar. Its intraday best was at PHP 56.70, while its weakest showing was at PHP 56.83 against the greenback.

Dollars traded rose to USD 1.17 billion on Tuesday from USD 821.1 million on Monday.

The peso was supported by a weaker dollar recently as the US central bank could keep its key rate steady for the rest of the year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The US dollar index hovered either side of unchanged at 105.04 on Tuesday due to hawkish expectations for the Fed, holding near last week’s six-month peak, Reuters reported.

A Reuters poll of 97 economists conducted on Sept. 7-12 showed 95%, or 94 economists, predicted the US central bank would hold the federal funds rate at the current 5.25%-5.5% during its Sept. 19-20 meeting.

The Fed raised borrowing costs by 25 basis points (bps) in July, bringing its target rate to a range between 5.25% and 5.5%.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year.

The dollar was also weakened by expectations of a firmer European inflation data for August, a trader added in an e-mail.

In July, Eurozone consumer prices grew by 5.3% from 5.5% in June, extending a downward trend that started in the autumn. This was still above the European central bank’s 2% target.

For Wednesday, the trader said the peso could weaken as the Chinese central bank is not expected to cut its policy lending rates, which might drive demand for the greenback.

Both the trader and Mr. Ricafort expect the peso to move between PHP 56.65 and PHP 56.85 per dollar on Wednesday. — AMCS with Reuters

PSE index declines amid hawkish Fed, BSP fears

The main index dropped to the 6,000 level on Tuesday as investors expect the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) to keep benchmark rates high amid growing inflation risks.

The Philippine Stock Exchange index (PSEi) went down by 76.60 points or 1.25% to end at 6,047.97 on Tuesday, while the broader all shares index dropped by 34.94 points or 1.05% to close at 3,274.30.

“The index fell to its lowest close in more than a year on concerns that rising oil prices and other inflationary pressures will force the BSP and Federal Reserve to keep policy rates elevated for longer,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“Both central banks are widely expected to hold rates steady during their meetings this week, but growing uncertainty about the path of interest rates over the next several months has soured investor sentiment on local equities,” he added.

Shares went down due to “heightened risk-off appetite” ahead of the policy meeting of the Federal Reserve this week, China Bank Securities Corp. Research Associate Lance U. Soledad said in an e-mail.

The Fed will hold its policy meeting on Sept. 19-20.

Markets expect the US central bank to keep rates unchanged after it hiked its target rate by 25 basis points (bps) to the 5.25% to 5.5% range at its July meeting.

The Fed has hiked rates by a total of 525 bps since it began its tightening cycle in March 2022.

Meanwhile, the BSP will hold its own review on Sept. 21, Thursday.

A BusinessWorld poll conducted last week showed 14 of 17 analysts expect the Monetary Board to keep the policy rate at a near 16-year high of 6.25% at its meeting this week.

The central bank raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation, but has since paused for three consecutive meetings.

International oil prices rose on Tuesday, extending the streak of increases for four straight sessions as oil output from shale-producing regions is projected to fall to 9.393 million barrels per day in October, Reuters reported.

US West Texas Intermediate crude rose by 98 centavos or 1.1% to USD 92.46 per barrel by 0615 GMT, while Brent crude rose by 46 centavos or 0.49% to USD 94.89 per barrel.

All sectoral indices ended lower on Tuesday. Property dropped by 54.76 points or 2.17% to 2,458.01; holding firms declined by 83.65 points or 1.42% to 5,781.68; industrials went down by 99.87 points or 1.13% to 8,692.52; services fell by 10.49 points or 0.7% to 1,479.85; mining and oil lost 70.53 points or 0.67% to close at 10,325.55; and financials inched down by 6.35 points or 0.35% to 1,767.46.

Value turnover inched up to PHP 3.65 billion on Tuesday with 596.63 million shares changing hands from the PHP 3.64 billion with 549.70 billion issues on Monday.

Decliners outnumbered advancers, 128 versus 62, while 43 names closed unchanged.

Net foreign selling climbed to PHP 566.33 million on Tuesday from PHP 419.26 million on Monday. — SJT with Reuters

House OK’s mining fiscal regime bill

The House of Representatives on Monday approved on second reading a bill establishing a new fiscal regime for the mining sector, which seeks to impose a margin-based royalty and windfall profits tax on miners.

Lawmakers approved House Bill No. 8937, one of the priority measures of the Marcos administration, through voice vote.

Under the bill, large-scale metallic mining operations within mineral reservations would be subject to a 4% royalty rate of the gross output of minerals or mineral products extracted.

Iloilo Rep. Lorenz R. Defensor had introduced the amendment to raise the royalty rate to 4%, from 3% in the committee report.

A margin-based royalty will be imposed on income of metallic mining operations outside mineral reservations.

For instance, miners with margins of 1% up to 10% would be subject to a 1% rate. This royalty rate can go up to as high as 5% for those with margins above 70%.

Under the bill, small-scale mining operations would face a royalty rate equivalent to 1/10 of 1% of gross output of minerals or mineral products extracted or produced.

The measure would also impose a margin-based windfall profits tax on mining operations. Miners with margins of more than 35% up to 40% would face a tax rate of 1%, while those with margins of more than 80% will be imposed a 10% rate.

The Mines and Geosciences Bureau would also require metallic mining companies to submit an assay report for each shipment before leaving the loading ports.

The bill also mandates “ring-fencing to prevent consolidation of income and expenses of all mining projects by the same taxpayer to ensure that losses from other mining projects could not be deducted from more profitable projects.”

All small-scale miners would be required to register with the Mines and Geosciences Bureau, as well as local government units. The bill encourages them to organize into cooperatives to qualify for the awarding of a People’s Small-Scale Mining Contract.

“With the structural changes to the mining fiscal regime proposed under House Bill No. 8937, the government is projected to collect an additional PHP 1.93 billion in royalties and taxes every year,” House Ways and Means Committee Vice Chairperson and Nueva Ecija Rep. Mikaela Angela B. Suansing said in her sponsorship speech on Sept. 5.

The proposed fiscal regime for the mining sector is expected to yield PHP 12.4 billion in 2025, PHP 12.9 billion in 2026, PHP 13.4 billion in 2027, and PHP 13.9 billion in 2028, according to Finance Secretary Benjamin E. Diokno.

Mr. Diokno in July urged Congress to immediately pass the mining tax reform measure, noting that foreign investors want a more simplified tax regime for the sector.

In his State of the Nation Address last July, President Ferdinand R. Marcos, Jr. said the proposed mining fiscal regime is one of his administration’s priority measures.

However, it is not included in the Legislative-Executive Development Advisory Council’s list of 20 priority measures targeted for Congress approval by December.

There is currently no counterpart measure filed in the Senate. — Beatriz Marie D. Cruz

Gov’t fully awards T-bills at lower rates

The government made a full award of the Treasury bills (T-bills) it auctioned off on Monday on expectations that the Bangko Sentral ng Pilipinas (BSP) will keep benchmark borrowing costs steady at its meeting this week.

The Bureau of the Treasury (BTr) raised PHP 15 billion as planned via the T-bills as total bids reached PHP 55.665 billion, or more than thrice the amount on offer.

Broken down, the Treasury made a full PHP 5-billion award of the 91-day T-bills as tenders for the tenor reached PHP 16.37 billion. The three-month paper was quoted at an average rate of 5.552%, 2.3 basis points (bps) above the 5.575% seen last week, with accepted rates ranging from 5.53% to 5.568%.

The government also raised PHP 5 billion as planned from the 182-day securities as bids for the tenor reached PHP 17.792 billion. The average rate for the six-month T-bill was at 5.939%, down by 2.1 bps from 5.96% seen last week, with accepted rates at 5.9% to 5.953%.

Lastly, the BTr borrowed the programmed PHP 5 billion via the 364-day debt papers as demand for the tenor stood at PHP 21.503 billion. The average rate of the one-year T-bill inched down by 11.7 bps to 6.073% from the 6.19% quoted last week. Accepted yields were from 6.04% to 6.08%.

At the secondary market before Monday’s auction, the 91-, 182- and 364-day T-bills were quoted at 5.6225%, 5.9641%, and 6.1636%, respectively, based on PHP Bloomberg Valuation Reference Rates data provided by the Treasury.

“The Auction Committee fully awarded bids for T-bills at today’s auction. The 91-, 182-, and 364-day T-bills fetched average rates of 5.552%, 5.939% and 6.073%; respectively, all lower than previous auction results and secondary market rates. The auction was 3.7 times oversubscribed, attracting PHP 55.7 billion in total tenders,” the BTr said in a statement on Monday.

“With its decision, the Committee raised the full program of PHP 15 billion for the auction,” it added.

T-bill yields declined as local monetary authorities said that the Monetary Board (MB) would likely continue its pause at its rate-setting meeting on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The high demand and lower yields were due to high market liquidity and signals from the BSP that there might be no need to hike rates at its next meeting as the acceleration in inflation for August was temporary, a trader likewise said via phone call.

BSP Governor Eli M. Remolona, Jr. told reporters on Thursday that the acceleration in August inflation was caused by supply shocks in food and fuel, which dissipate “fairly quickly.”

“If that’s all there is, if there are no further supply shocks beyond that uptick in August, then it won’t be necessary to hike the policy rate…It won’t justify an easing, (but) it won’t be necessary to raise the policy rate,” he said.

This is in line with the expectations of 14 out of 17 analysts in a BusinessWorld poll conducted last week which see the MB maintaining the policy rate despite the inflation uptick in August.

However, three analysts see the BSP raising borrowing costs by 25 bps at the Sept. 17 meeting to preemptively ward off inflationary pressures. If realized, this would bring the target reverse repurchase (RRP) rate to 6.5%.

The BSP extended its policy pause for a third straight time at its Aug. 17 meeting, keeping the benchmark interest rate at a near 16-year high of 6.25%.

The central bank has raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.

The MB will next meet on Sept. 21 to review policy.

On Tuesday, the BTr will offer PHP 30 billion in reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine years and 11 months.

The BTr wants to raise PHP 180 billion from the domestic market this month or PHP 60 billion via T-bills and PHP 120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — Aaron Michael C. Sy

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