Banks tried pushing short-term yields higher during the monthly auction for treasury bills Monday, but the government prevented an across-the-board increase in interest rates by rejecting a substantial volume of bids.
National Treasurer Rosalia de Leon said the government could afford to reject some bids given the favorable liquidity position of the government.
The cost of the government’s three-month borrowing became even cheaper, with the rate for the 91-day bills dropping 7.7 basis points to 0.589 percent.
There was a significant appetite for the three-month government securities as bids amounted to P5.9 billion as against the government’s offer of only P4 billion.
The 182-day bills fetched 0.897 percent, up 2.4 basis points from a month ago. Bids for the six-month debt paper reached P7.5 billion as against the P6 billion that the government was programmed to sell. However, the Treasury’s auction committee decided to accept only P4.85 billion to prevent a bigger increase in the six-month rate. Had the auction committee accepted the amount of bids stated under the borrowing plan, the interest rate for the six-month bills would have gone up by as much as 18.7 basis points to surpass the one-percent mark and hit 1.06 percent.
The cost of the government’s one-year borrowing fell, with the rate for the 364-day bills down 26.7 basis points to 0.933 percent.
Bids for the one-year debt securities amounted to P7.78 billion as against the government’s debt offering of P10 billion. The auction committee accepted only P5 billion worth of bids for the one-year securities to avoid an increase in the one-year interest rate. Had it accepted more bids, the one-year rate would have risen by as much as 23.1 basis points to exceed the one-percent mark at 1.43 percent.
“There was no reason for us to accept higher interest rates given the healthy cash position of the government,” De Leon told reporters after the auction, adding that the substantial liquidity in the domestic market was another reason why banks were in no position to seek higher yields.
De Leon said the banking system was awash in cash especially after the recent issuance by the central bank of a directive prohibiting retail funds from the special deposit accounts (SDAs). She said a substantial portion of the money going out of the SDA facility was being invested in government securities.