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October 01, 2022

Cost conscious Treasury allows T-bill rates to rise across the board

The government on Monday proved mindful of its increasingly challenged finances and allowed the sale of Treasury bills (T-bills) to move higher across the board after earlier rejecting billions of pesos in offers.

The most pronounced of the increases relate to the intermediate 182-day T-bills which jumped 40.9 basis points higher from when it last sold to 1.967 percent, indicating greater investor risk aversion over the next six months.

The rate for the 364-day tenor moved up at half the magnitude of only 20.9 basis points to 1.943 percent while the 91-day tenor that used to be the benchmark increased by 27.2 basis points to 1.577 percent.

National Treasurer Rosalia De Leon expected the upticks but sought to limit their rise by partially awarding the volume sold to the various government securities eligible dealers or GSEDs.

For instance, De Leon sold only P3.037 billion worth of the three-month tenor instead of the full amount of P5 billion even though this offering attracted a total P5.922 billion.

She sold only P3 billion of the six-month T-bills which attracted less than the desired P5 billion with only P4.22 billion offers and only P3.1 billion of the similarly undersubscribed one-year T-bills attracting only 4.07 billion.

De Leon had been confident of the rejections in recent weeks having earlier sold P458 billion in retail Treasury bonds (RTBs) in February this year.

But De Leon’s boss, Finance Secretary Carlos G. Dominguez, had been more candid about the tentative conditions in the bond markets at the moment on account not only by the difficulties presented by the pandemic but also Russia’s war against Ukraine which has sent cost northward even more.

Dominguez is apprehensive that borrowing costs for the now heavily-indebted local economy should become even more expensive down the line, particularly when the US Fed, the most influential of all central banks, begins to tweak the so-called federal funds rate to help combat price pressures in the world’s largest economy.

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