T-bill rates post double-digit upward adjustments

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Treasury bill (T-bill) rates pushed higher across the board yet again on Monday, led by the 91-day rate, which moved 25.4 basis points up to 2.252 percent, the Bureau of the Treasury (BTr) said.

According to the BTr, T-bill rates were higher as a result of higher inflation expectations, the latest word from the US Federal Reserve (Fed) indicating not two, but more likely three, interest-rate adjustments this year and so-called normalization of rates by the Bangko Sentral ng Pilipinas.

The auction committee awarded T-bills with a 91-day tenor totaling P4.295 billion, a partial award compared to the P6 billion on offer. Total tenders for the IOU’s reached P8.655 billion, with the committee rejecting P4.360 billion.

The 91-day T-bill was set at 2.252 percent, 25.4 basis points higher compared to only 1.998 percent at the previous auction. Its original issue date was on November 16, 2016.

“We recognize that the market will really be demanding very high rates because of increasing inflation expectations. Even in the survey, they’ve already indicated there will be a 10- to 20-basis-point jump in terms of secondaries and compared to the previous auction,” said Rosalia V. de Leon, National treasurer.

The BTr sold 182-day T-bills totaling only P3.570 billion, lower compared to the P5 billion on offer.

Total tenders for the six-month tenor reached P5.020 billion. The auction committee rejected P1.450 billion in the end.

The 182-day rate was set at 2.467 percent, 21.5 basis points higher compared to the previous auction rate of only 2.252 percent.

“The rates are really going up and even the market is saying that by March the expectation is that the BSP might already start the normalization of the rates. And in the case of the US Fed, maybe the Fed will again take action in March. I think that was also already incorporated in the bids that were submitted,” she added.

The 364-day tenor was partially awarded at only P2.495 billion, instead of the full offering of P4 billion.

The auction committee received a total of P3.745 billion in tenders and rejected P1.250 billion.

The annual average rate for the set of IOU’s was set at 2.766 percent, which was 19.5 basis points higher compared to the previous auction rate of only 2.571 percent.

Rates inched up at the auctions on Monday by an average of 22.13 basis points from previous auction results.

The total T-bill award aggregated only P10.36 billion, instead of the full P15 billion on offer. Subscription tenders reached P17.42 billion.

“The decision to cap the accepted bids was seen to gradually move the market amid the upward adjustment to benchmark rates driven by local, as well as international, developments.

Last week the BSP announced a higher inflation turnout for January and revised its outlook for 2017 to 3.5 percent, from 3.3 percent previously.

Global uncertainty remains heightened, awaiting a clearer direction for the United States  fiscal and monetary policy, as well as political moves in the euro zone,” the BTr said.