Bellwether T-bill rate inches up to 2.935%

After setting historic lows for three consecutive auctions, the average rate on the benchmark 91-day Treasury bills (T-bills) inched up to 2.935 percent yesterday although Treasury officials rejected all offers for 182-day and 364-day T-bills after banks sought yields well above recent record lows.

The government sold P500 million worth of 91-day T-bills at an average rate of 2.935 percent, up from a record-low of 2.885 percent at the previous auction on Feb. 19.

National Treasurer Omar Cruz told reporters after the auction that the auction committee decided to accept the bids for the benchmark notes since the market was trading along these rates anyway.

"For the rest of the tenors, it’s a different matter altogether," Cruz said. "The bids were nowhere near where the market is trading. They were so out of the range in the last few days and weeks that they were really just throw-away bids."

Cruz said bank and investment houses were spooked by turmoil on global markets and were only really interested in buying short-term debt, such as 91-day T-bills. "Because of cautious sentiment and uncertainty they want to play it safe."

If the committee had not rejected the bids for the 182-day notes, the rates would have gone up an average of 3.72 percent against the previous rate of 3.395 while the rate on the 364-day notes would have gone up by 56.4 basis points from 3.998 percent to 4.384 percent.

"We are awash with cash right now, we are not doing the auctions for funding," Cruz said. "So we can afford to sit this one out."

Cruz said the rates on the 91-day T-bills were more reasonable and well within the trading band at the market. "If they don’t bid at market levels, we will have no problems rejecting them," he said.

According to Cruz, the market was still largely uncertain over the fall-out from the global sell-off that should actually migrate funds from the equities market into the bond market.

"We will see how it turns out," Cruz said. "People are being cautious so they wanted to go short. That’s why we saw the appetite focused on the 91-day notes."

Although Cruz said the government did not intend to cancel its future auctions, he cautioned the market that the government did not need to raise cash, especially after the sale of the government’s share in the Philippine Long Distance and Telephone Co (PLDT).

"We can give the market all the time it needs to settle down," he said. "Believe me, we can afford to give them a lot of time."

The sale of the PLDT shares gave the government a P23-billion non-recurring windfall which Cruz said would be enough to largely ignore attempts to jack up interest rates away from the current market level.