Yields for 3-, 6-month T-bills fall in first gov’t auction in 2012

MANILA, Philippines—Yields for the three- and six-month Treasury bills fell in the first auction for short-term government securities for 2012, as high liquidity prompted banks to scramble for the virtually risk-free debt instruments.

However, interest rate for the one-year bills fell as the anticipated cut in the key policy rates by the Bangko Sentral ng Pilipinas dampened appetite for these securities.

“They [banks] are anticipating a policy action from the BSP, and… the tenders were lower than offered,” National Treasurer Roberto Tan said in a press briefing after the auctions held at the Bureau of the Treasury in Manila.

The rate for the 91-day T-bill settled at 1.428 percent, declining by 12.8 basis points from the 1.556 percent registered in the previous auction for the securities held in December.

Tenders for the three-month government securities amounted to P6.88 billion, much higher than the P2.5 billion debt offering. The auction committee accepted just P2.5 billion worth of bids despite the over-subscription, as the government tried not to over-borrow.

The rate for the 182-day bills hit 1.824 percent, down by 0.6 basis points from 1.83 percent in the previous auction.

Bids for the six-month debt instruments reached P4.15 billion, resulting in an over-subscription as the debt offering stood at only P3 billion. Similar to the three-month bills, accepted bids for the six-month securities were just the same as the debt offering, as the auction committee said there was no need for higher-than-scheduled borrowing.

Lastly, the yield for the one-year bills rose to 2.077 percent, up by 99.8 basis points from the previously recorded rate of 1.079 percent.

Tan said the demand for the one-year bills was dampened by prospects of a policy-rate cut by the BSP.

Earlier, BSP Governor Amando Tetangco Jr. hinted that the central bank might cut its key policy rates within the first quarter of this year as a response to the ill-effects on the domestic economy of unfavorable developments offshore.

These unfavorable developments include the lingering debt crisis in the eurozone, which is feared to suffer from a mild recession this year, and the resulting cut in the country’s export earnings.

With lower BSP policy rates, which affect commercial interest rates, demand for bank loans is expected to accelerate. Consequently, consumption and investments are expected to be boosted as well.

But with lower policy rates, banks will earn less from their deposits to the BSP. To compensate for this, analysts said banks would like to get higher yields for their investments in longer-dated government securities, thus the rise in the one-year T-bill rate.

Funds raised from sale of government securities this year are aimed at helping plug a programmed budget deficit of P260 billion.

The P260-billion deficit ceiling of the national government for this year is less than the P300-billion ceiling set for 2011.

The government is trying to gradually reduce the deficit as it aims for higher credit ratings for the country.