Benchmark T-bill rate down

The benchmark 91-day Treasury bill rate went down 6.2 basis points to 9.59 percent even as government gave in to the market’s move to push up interest rates for longer-term T-bills.

In yesterday’s auction, the Bureau of Treasury succumbed to pressure from banks which bid up rates for the 182-day and 364-day T-bills although at a decelerated pace. The six-month T-bill climbed 13.4 basis points to 11.659 percent from 11.525 percent, while the one-year bills climbed 42.1 basis points to 12.798 percent from 12.557 percent in the previous week.

All tenors were oversubscribed, with total tenders of P6.615 billion as against total offering of P4 billion. Bids for the 91-day bills reached P2.675 billion, while those for the 182-day bills totalled P2.140 billion and those for the 364-day bills reached P1.8 billion.

Treasury officials said the yield for the 91-day bill was lower because of ample liquidity. However, the longer-termed bills went up in view of the higher reserve requirements imposed on banks, and the potential of another hike in reserves remains as monetary authorities continue to monitor the market to determine if enough liquidity has been siphoned off from the market which could be used to speculate against the peso.

Deputy National Treasurer Eduardo Mendiola said government expects T-bill rates to go down next week, especially if the US Federal Reserve Committee pushes through with the anticipated 25-basis points reduction of its key policy rates today.

The BTr since last week has been forced to accept higher bank rates after two weeks of blocking off attempts by banks to bid up interest rates as banks scrambled for cash anew to comply with the Bangko Sentral ng Pilipinas move to raise liquidity reserves by an additional two percentage points.

In justifying its acceptance of the higher rates, the BTr said the bids reflected market sentiment and here was enough volume to determine the benchmark rate.

However, some government securities dealers were rather surprised by what they disclosed as the BTr’s "surrender." "The BTr should have rejected the bids altogether and the market could have run after them in the following auction," said one trader.

Another trader said giving in to market sentiment will only encourage banks to further push up interest rates.

"Well, if the treasury department says there is enough volume to justify the increase then banks will have the tendency to just talk among themselves and agree to bring up rates. The government as a borrower, has to show its limits," one trader said.

Some traders said the BTr despite its previous claims that it could afford to reject unreasonably high bids, "is acting like it has no money," even as it went on several borrowing sprees to fill up government coffers.

"If the government says it has the money, then it should put its foot down and talk their position, otherwise, the market will continue to test government’s resilience," a trader from a foreign bank said.