T-bill rates rise; peso slides

As Congress argued over the impeachment of Supreme Court Chief Justice Hilario Davide Jr., markets traded on pessimism yesterday with the peso weakening by another 9.50 centavos to close at 55.365 to $1 and the rates for the benchmark 91-day Treasury bill (T-bill) rising by 29.6 basis points to settle at 6.262 percent.

Trading at the Philippine Dealing System (PDS) was brisk with total volume reaching $203.5 million as jittery investors scrambled for more dollars due to rising political concerns which was aggravated by the weekend crisis at the Ninoy Aquino International Airport (NAIA).

On the other hand, the auction at the Bureau of Treasury (BTr) was likewise aggressive, with banks making throw-away bids as they expect the auction committee to reject anyway.

The peso opened at 55.39 to the dollar and weakened to as low as 55.49 to $1. The currency, however, managed enough upward momentum to recover from the intra-day low, hitting a high of 55.210 to $1.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amando Tetangco Jr. said the on-going imbroglio at Congress had little effect on the market but investors were still wary about what the ultimate outcome would be.

"Even before these developments, however, banks had already started short-selling," Tetangco said.

Likewise, the auction at the BTr showed banks attempting to jack up interest rates on T-bills where rates went up across the board except for the one-year bills where the auction committee opted to make a full rejection.

Deputy Treasurer Mina Figueroa told reporters that the volume was too small for the auction committee to allow rates to go up significantly, so part of the tenders for the benchmark 91-day bills and 182-day bills were rejected.

Rates for the 91-day bills went up to 6.262 percent while that of the 182-day T- bills went up to 7.421 percent.

The rates on the one-year bills would have gone up to 8.843 percent but the auction committee rejected all bids.

"I think that banks were looking at throw-away bids and they were not expecting their bids to be accepted," Figueroa said. "We’ve always said that we are going to allow rates to go up closer to the policy rates of the central bank."

At present, the BSP’s overnight rates stand at 6.75 percent.

Figueroa said there was little volume in the T-bills market because most banks wanted to hold on to their cash while the political outlook was still confused and uncertain.

Despite the pessimism in the market, Figueroa said there was no plan to postpone the planned P20-billion Retail Treasury Bond (RTB) offer and the $250-million dollar-denominated retail treasury bond issue.