P15-B T-bills awarded as rates rise following U.S. attacks vs Houthis

The Bureau of the Treasury on Monday fully awarded P15 billion in Treasury bills or T-bills at higher rates as investors weigh inflation risks from US attacks against Yemen’s Houthis rebel group.

The 91-day, 182-day and 364-day papers with an offer value of P5 billion each drew total bids amounting to P43.2 billion or 2.9 times oversubscription.

Data from the BTr’s auction on Monday showed the three-month papers fetched an average rate of 5.226 percent, up from 5.102 percent recorded in the last auction on 8 January.

Meanwhile, the six-month papers had an average rate of 5.685 percent, higher than the 5.582 percent in the previous auction.

Last, the one-year papers fetched an average rate of 5.999 percent, slightly higher than the 5.973 percent posted in the previous auction.

The shorter tenor debt papers attracted bids worth over P13 billion each or a little more than double the programmed offer, while the one-year papers drew more than thrice at P16.376 billion.

BSP’s elevated policy rate

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation, said the rates increased as investors took advantage of the elevated policy rate of the Bangko Sentral ng Pilipinas at 6.5 percent.

“The recent upward correction in Treasury bill auction yields came after the relatively sharp decline during the November 28, 2023 auction,” he said.

“They have been unusually still much lower compared to the various BSP interest rates,” Ricafort continued.

He shared that recent rates of BSP securities stood at 6.7 percent levels both for 28-day and 56-day securities.

Another factor for the higher Treasury bills’ rates, Ricafort said, could be the US attacks against Yemen’s Houthis rebel group who have been threatening cargo ships passing through the Red Sea.

Missile shot down

Crude oil prices rose yesterday after the US shot down a missile fired by the Houthis toward its USS Laboon vessel in the Red Sea, according to a report by Aljazeera.

Bloomberg data showed 0.01 percent growth for WTI prices and 0.12 percent for Brent.

“Global crude oil prices reached one-month highs after increased tensions at the Red Sea area recently, after the US and the UK started air strikes on Houthi rebels,” Ricafort said.

The economist said Treasury rates may decline if these attacks subside and central banks lower their policy rates.

Dovish signals

“There were dovish signals at the start of last week on possible 1.00 local policy rate cuts for 2024,” Ricafort said.

“The markets priced possible US Federal Reserve rate cuts of more than 1.60 for this year, which the BSP could follow to maintain healthy foreign exchange and investment levels,” he added.