T-bill rates rise as peso weakens to 50:$1

MANILA, Philippines—Treasury bill rates rose across-the-board on Monday (July 12) alongside a weaker peso which fell to the 50:$1 level last week.

The Bureau of the Treasury awarded all P15 billion in T-bills it offered as demand remained strong with a total of P42.1 billion in bids across the three tenors, or maturity periods, making the auction almost three times oversubscribed.

The Treasury sold P5 billion in the benchmark 91-day debt paper at an average of 1.068 percent, up from 1.044 percent last week.

It also awarded P5 billion in 182-day IOUs at 1.384 percent, up from 1.351 percent previously.

The P5 billion in 364-day securities fetched an annual rate of 1.593 percent, up from 1.568 percent.

“Rates moved slightly higher as the peso breached the 50:$1 mark,” National Treasurer Rosalia de Leon said. But the Treasury said the yields remained below those in the secondary market.

The close of 50.08 against the greenback last Friday (July 9) was the weakest in over a year amid a stronger US dollar which benefited from a hawkish US Federal Reserve, Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said in a report over the weekend.

“Since the start of 2021, the peso already depreciated versus the US dollar by a total of P2.057 pesos or 4.3 percent (vs. 48.023 in end-2020),” Ricafort added.

The year-on-year surge in May imports, which widened the trade-in-goods deficit to its biggest since the pandemic started in 2020, also weakened the peso, he said.

Also, the domestic currency depreciated due to “lingering concerns over the more contagious coronavirus variants, such as Delta and Lambda, that could weigh on global economic growth and recovery,” he added.

Ricafort expects the peso to end 2021 at 48.50-49.50:$1, before further depreciating to 49-50 against the US dollar by end-2022.

“The direction of the US dollar-peso exchange rate would largely hinge on the recovery of the economy as well as of imports,” he said.

“The peso exchange rate could range 48-50:$1 levels in 2021 to 2022 amid the expected economic recovery during the period that would fundamentally lead to a corresponding pick up in importation and the demand for US dollars to pay for imports,” Ricafort said.

TSB