T-bills close mixed

Treasury bill (T-bill) rates closed mixed yesterday, with longer-term T-bills posting substantial gains due to expectations of an interest rate hike in the US, dealers said.

Rates for the bellwether 91-day T-bills dipped by 5.6 basis points to 8.690 percent from 8.746 percent the previous week, resulting in the full award of the P1 billion offering.

Rates for the 182-day T-bills climbed by 7.5 basis points to 9.900 percent from 9.825 percent while that of the 364-day T-bills rose by a stronger 16.3 basis points to end at 10.963 percent from 10.800 percent.

Government made partial rejections for the six-month and one-year instruments. Of the P1.5 billion offering for the two maturities, the auction committee awarded only P1.2 billion for the six-month T-bills and P1.030 billion for the one-year T-bills.

"The 91-day rate was not reflective of the market. It went down only because there was more demand than supply. Some clients are happy with the current yields," a dealer from a local commercial bank said.

Analysts said the rise in the 182-day and 364-day bills was in reaction to the expected rise in the US interest rates. The US Federal Open Market Committee will meet today, to discuss the economic performance of the US.

They said if the US Fed decides to hike rates by 50 basis points, the Bangko Sentral ng Pilipinas may also jack up its interest rates.

Once US rates rise, analysts said the peso is bound to weaken further against the dollar since portfolio funds will be flown out of the country to be invested in higher yielding US financial instruments.

Over the medium-term, analysts expect T-bill to go down with inflation still at a low single-digit level, the government finances still comfortable, and banks still awash with cash due to weak loan demand.