Big demand pushes 91-day treasury bill rate down to 1%

The benchmark 91-day treasury bill rate fell during the latest monthly auction for government securities yesterday as market uncertainties pushed banks to go for very short-term investments.

The rate for the three-month debt paper settled at 1 percent, down 45.8 basis points from the previous auction.

The drop came as bids reached P21.31 billion, more than five times the government’s debt offering of only P4 billion. Despite the oversubscription, the Bureau of the Treasury’s auction committee accepted just P4 billion worth of bids.

On the contrary, rates for the longer-dated bills rose as financial markets globally showed some risk aversion against emerging-market assets.

The 182-day yield jumped by 139.9 basis points to 1.4 percent. The auction committee accepted P6 billion worth of bids, thus raising the entire amount in the borrowing program. Bids for the 182-day bills hit P16.53 billion.

Despite the significant increase, the Treasury said the new rate for the six-month debt paper was reasonable because this was aligned with rates in the secondary market.

The rate for the 364-day debt paper reached 1.865 percent, or an increase of 78.6 basis points from the rate recorded in last month’s auction. The government accepted only P4.4 billion worth of bids compared with the P10 billion stated in the borrowing program.

The Treasury said rejecting some of the bids was meant to prevent an unreasonable increase in the one-year borrowing cost.

It said the latest rate for the 364-day bills reflected secondary-market rates.

Market uncertainties continued to be driven by the absence of a definite schedule for the US Federal Reserve Board’s tapering of its stimulus program for the American economy. The Fed had said that the exact amount and the timing of its tapering would continue to depend on future macroeconomic data.

So far, the Fed has cut its monthly bond purchases by $20 billion from the original amount of $85 billion. The Fed is expected to continue with the tapering this year, although the amounts of further cuts have yet to be determined.