Oil prices higher in Asian trade

The rates on the bellweather 91-day Treasury bills (T-bills) tumbled yesterday but yields on longer tenors soared as the market based its reaction on the latest budget deficit figure and the decision of the Bangko Sentral ng Pilipinas (BSP) to siphon off excess liquidity by opening its special deposit account (SDA) to trust entities.

The average rate on the 91-day T-bills settled at 2.996 percent, 4.8 basis points lower than its average two weeks ago as banks poured P1.85-billion worth of tenders for an offer size of only P500 million.

Yesterday’s auction was the first since the BSP announced that it is mopping up liquidity by opening its SDA facility to trust entities.

As a result, the market stayed on the expected track for the shorter term T-bills but pushed rates up on longer-term notes as banks took the cue from the rates on the BSP’s SDAs.

For the six-month and one-year notes, the average rates went up by 55.2 basis points and by 135.4 basis point, respectively.

The rates on the 182-day notes surged from 3.721 percent to 4.274 percent as banks competed for the total offer of P1.5 billion against tenders of P4.965 billion.

On the other hand the rate on the one-year notes soared from 3.820 percent to 5.174 percent indicating a certain level of uncertainty over the country’s fiscal prospect over a 12-month period.

National Treasurer Omar Cruz told reporters that the market was putting a premium to align rates with the rates on the new special deposit account facility of the BSP.

“The market will price everything in,” Cruz said. “That includes the fiscal slippage in the first four months of the year and the monetary policies now in place.”

Cruz said the rates are supported by volume, compelling the auction committee to accept the bids where they were presented by the market.

“The SDA rates are anywhere from five to eigth percent so the market is just taking a cue from that,” Cruz said, adding that the rates also reflected market disappointment over Standard&Poor’s decision to keep the country’s credit ratings and outlook.

Yesterday was also the first time since February that the auction committee actually accepted bids for the one-year notes. Cruz said earlier that the government did not need the cash bad enough to allow higher rates on the 364-day notes.