THE bellwether 91-day Treasury-bill rate shot up to its highest in 21 months during Monday’s auction at the Bureau of Treasury, as investors voiced concern over accelerating inflation and skyrocketing oil prices.
Yield on the three-month paper rose 9.7 basis points to settle at 7.869 percent, the highest since January 14, 2002, when the market demanded 8.141 percent.
Banks use the 91-day T-bill rate as a basis for pricing their loans, such that a rising rate would translate to higher borrowing costs for businesses and households.
Investors also asked for a 10.6-basis-points hike in the yield for the 182-day T-bill and a 2.2-basis-points increase for the 364-day issue. The six-month and one-year debt instruments fetched 8.951 percent and 9.926 percent, respectively.
The 91-day issue was oversubscribed, as banks were willing to buy as much as P5.448 billion versus the government’s offering of only P4.5 billion. The government made a partial award of P4.023 billion.
Similarly, the market had a strong appetite for the 364-day issue, with tenders reaching P8.3 billion against the government’s offering of P3 billion. The government made a full award.
In contrast, market demand for the 182-day issue was weak, as investors were willing to take in only P2.910 billion out of the P3.5 billion on offer. The government made a partial award and sold only P1.88 billion.
Deputy Treasurer Eduardo S. Mendiola said the market’s preference for the longer-term securities reflected confidence in the ability of the government to get itself out of the fiscal rut.
“They thought the rates are going down. It seems to be an indication of an improvement in their perception of the government,” he told reporters after the auction.
Although it had allowed the rates to continue their rise, the auction committee said the rates it accepted are within reasonable levels.
A trader said that investors had sought higher premiums owing to concerns over rising inflation and rising oil prices.
“The market is really looking at higher interest rates,” the source said.
On the strong demand for the one-year debt paper, the trader said investors flocked to the 364-day issue because “they see value in it,” adding that the yield on the one-year paper is deemed a good investment.
The trader also said that the market was largely unimpressed with congressional leaders’ promise over the weekend to accelerate the passage of tax bills.
“It’s a wait-and-see thing. The market would like to see it happening rather than rely on lip service,” the trader said.
By Armie Margaret Lee