T-bill rates fall as demand for securities surges
Oversubscription marks auction of gov’t debt notesBy Michelle V. Remo
Philippine Daily Inquirer
Treasury bill rates on Monday fell across the board due to the country’s favorable macroeconomic indicators and on reports that the US Federal Reserve would inject more funds into the US economy, boosting appetite for peso-denominated government securities.
According to National Treasurer Roberto Tan, the decline in T-bill rates was expected given the latest developments in the domestic and external fronts.
The strong appetite for the T-bills was a normal reaction of the market “because inflation and the government’s budget deficit are very much in control,” Tan said in a briefing after Monday’s T-bill auction.
The 91-day bills fetched 0.745 percent in Monday’s auction, down by 50.4 basis points from the 1.249 percent recorded two weeks ago. The rate is the lowest in nearly a year.
Bids for the three-month government securities reached P7.814 billion, way higher than the P1 billion worth of bills offered for sale by the government. Not wanting to borrow more than what it programmed, the government accepted just P1 billion worth of bids for the three-month securities.
The 182-day bills fetched 1.445 percent, down by 26.8 basis points from the previous rate of 1.713 percent.
Bids for the six-month debt paper amounted to P8.193 billion, exceeding the P2.5 billion debt offering of the government. The auction committee accepted just P2.5 billion worth of bids.
The 364-day bills fetched 1.906 percent, down by 31.4 basis points from 2.22 percent previously.
Bids for the one-year debt paper hit P7.86 billion, exceeding the debt offer of P4 billion. Again, the auction committee stuck with the borrowing program and accepted just P4 billion worth of bids.
Tan said the third round of “quantitative easing,” or QE3, announced by the US Federal Reserve also contributed to an increase in demand for T-bills.
QE refers to the efforts of a country’s central bank to stimulate the domestic economy mainly through the purchase of bonds. Under the QE3, the US Federal Reserve intends to buy a billion dollars’ worth of mortgage-backed securities to help stimulate its lackluster economy.
The funds to be injected by the US Federal Reserve are expected to spill over to emerging economies, including the Philippines. In particular, beneficiaries of the funds may invest some of the money to acquire assets from emerging markets, such as peso-denominated securities.
As a result, some market players may take advantage of this situation by buying government securities this early, thus increasing demand for T-bills.
Citing improvements in revenue collection, the government expects the budget deficit this year to stay within the set limit of P279.1 billion, equivalent to 2.6 percent of the country’s estimated gross domestic product.
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