Treasury bill rates fall across the board

Treasury bill rates fell across the board as funds being withdrawn from special deposit accounts (SDAs) of the Bangko Sentral ng Pilipinas boosted demand for short-term government securities.

National Treasurer Rosalia de Leon said the enormous liquidity available in the domestic market led to the oversubscription of treasury bills across all maturities.

The rate for the bellwether 91-day paper dropped 23.4 basis points to 0.666 percent. Bids for the three-month government securities reached P19.21 billion even as the government was selling only P4 billion. The auction committee of the Bureau of the Treasury chose not to borrow more than what was scheduled. De Leon reiterated that the government had ample cash at the moment.

The rate for the 182-day bills fell 12.7 basis points to 0.873 percent. Bids for the six-month debt paper amounted to P20.8 billion, but the auction committee stuck with the borrowing plan and sold only P6 billion.

The rate for the 364-day bills declined 5 basis points to 1.2 percent. Bids for the one-year bills amounted to P13.98 billion compared with the government’s debt offering of only P10 billion.

“There was a lot of liquidity coming mostly from domestic sources,” De Leon said in a briefing after the latest monthly auction for treasury bills held Monday at the Treasury’s headquarters in Manila.

De Leon said some banks have started pulling out funds from SDAs in compliance with a directive from the Bangko Sentral ng Pilipinas. (See story on this page.)

“Banks were given until the end of the month to withdraw at least 30 percent (of the SDAs), so banks are already starting to unwind. Some of the SDA funds are going to government securities,” De Leon said.

About P1.4 trillion is expected to be covered by by the new SDA prohibition. Given this huge amount, De Leon said demand for other financial instruments, including government securities, could rise further in the coming months. As such, she said, there was a likelihood that interest rates on government securities would remain relatively low at least over the short term.

She said substantial liquidity in the domestic economy made the Philippine government less vulnerable to the outflow of foreign portfolio investments.

De Leon said the government was expected to stay liquid and be able to raise funds through the sale of securities even if foreign fund owners pull their money out of emerging markets, just like what happened in the past weeks.