T-bills down as peso stabilizes

After several weeks of volatile trading, the country's financial markets calmed down yesterday, with the peso holding steady against the dollar while Treasury bill (T-bill) rates were slightly down. Still, the Bureau of Treasury made partial rejections.

At the Philippine Dealing System, the interbank electronic currency market, the peso was almost unchanged, closing at 42.71 to a dollar from Friday's close of 42.72, after the Bangko Sentral ng Pilipinas (BSP) threatened to investigate the foreign transactions of banks, currency traders said.

"The market took a breather today. Banks with long dollar positions decided to cut their holdings by one to two million dollars. But there are no massive self-offs since the market is still cautious," a trader from a local bank said.

Traders said banks unloaded their dollars after BSP Gov. Rafael Buenaventura announced last week that they would investigate forex deals of banks and punish those that have violated existing rules.

The peso's weighted average stood at 42.649 to a dollar, 32.7 centavos higher than Friday's weighted average of 42.976. It was trading at a range of 42.75 to 42.56 while volume of transactions was at $163.7 million, down from $170.7 million last Friday.

Buenaventura told reporters yesterday that speculation at the foreign exchange market has abated "for the time being."

"It (peso) is stabilizing," he said. However, he said the worst for the peso is not yet over noting that political uncertainty remains.

With the peso stabilizing, he said there is no need, at the moment, to raise the BSP's key interest rates. He noted that the US economy appears to be slowing down and fears that the Federal Reserves might raise US rates by another 50 basis points next month are losing ground.

"The good news is that it looks like the US economy maybe slowing down already and the certainty of another 50 basis points increase in its rates is no longer there," Buenaventura said.

At the T-bill auction yesterday, the benchmark 91-day T-bill rate dipped by 0.7 basis point to 8.968 percent from last week's 8.975 percent. The one-year rate declined by 2.7 basis points to 11.396 percent from 11.423 percent. The Bureau of Treasury, though, rejected in full the bids for the six-month notes due to the high rates quoted by bank. Thus, the rate remained at last week's 10.375 percent.

Banks were still liquid, though, with tenders reaching P10.415 billion although total awards amounted to only P2.5 billion.

Finance Secretary Jose T. Pardo said the government can afford to do a partial rejection, a move seen to temper any abrupt rise in interest rates, since the national coffers remain to be in healthy cash position. --

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