T-bill rates up on US downgrade, hawkish BSP

MANILA, Philippines — The government saw yields increase for short-term securities following the credit downgrade in the US, as well as the stand of the central bank on monetary policy.

The Bureau of the Treasury yesterday made a partial award of P11.75 billion out of the P15 billion on offer.

Yesterday’s auction effectively broke the three straight weeks of full award for T-bills.

Rates yesterday were mixed in comparison with the reference rate, recording a decline for the 91 days, but moving upward for the 182 and 364-day tenors.

The market is reacting from the latest downgrade of Fitch of the US credit rating to AA+ from AAA, amid expected fiscal deterioration.

The higher rates also stem from the hawkish stance of the Bangko Sentral ng Pilipinas (BSP) for its upcoming policy meeting next week.

BSP Governor Eli Remolona last week said the central bank is ready to tighten monetary policy yet again, citing a number of upside risks to inflation.

Interest rates remained at 6.25 percent after two consecutive pauses by BSP in May and June.

Meanwhile, rates for the 91-day T-bills dropped by 10.4 basis points to 5.598 percent from the secondary rate of 5.702 percent, but higher from last week’s 5.224 percent.

On the other hand, the 182-day short-dated debt papers saw rates go up by 6.7 basis points to 5.99 percent and above last week’s level of 5.789 percent.

Only P3.6 billion and P3.15 billion were awarded for the 91 and 182 days offer, respectively.

Rates averaged 6.94 percent for the 364-day T-bills, 9.6 basis points above the secondary rate and slightly up from last week’s auction rate of 6.21 percent.

Still, the entire P5 billion each was awarded for the one-year securities.

However, overall demand for the short-term securities declined by 16 percent to P38.062 billion. The auction was oversubscribed by 2.54 times.

Bids went down across the board to P17.509 billion, P10.82 billion, and P9.733 billion for the three, six, and 12 months securities, respectively.

For the month of August, the Treasury aims to raise P225 billion.

Of this, P75 billion is expected to be borrowed from T-bills. It has so far raised P26.75 billion.