T-bill rates increase again

The cost of 91-day and six-month debt papers rose in Monday’s auction amid investors’ concerns on the forthcoming elections and the fiscal deficit.

The benchmark 91-day Treasury bill rates inched up 3.8 basis points to 3.935 percent from 3.897 percent in the previous auction held two weeks ago. The 182-day debt paper went up by 3.5 basis points to 4.2 percent from 4.165 percent in the previous auction.

“The combination of things such as elections and deficit has been prompting investors to look for alternative markets that offer higher yields,” said National Treasurer Roberto Tan.

The 364-day debt paper bucked the trend, dropping 4.7 basis points to 4.62 percent from 4.667 percent in the previous auction on expectations that economic and political uncertainties would simmer down over the long term.

Tan said political uncertainties in the runup to the May 2010 elections as well as a higher budget gap had been pushing yields upward since late last year.

The government raised P8.5 billion Monday after accepting P2 billion for the 91-day, P3 billion for the 182-day and P3.5 billion for the 364-day debt papers.

Higher rates for the 91-day debt papers last week prompted the Treasury to reject some of the bids and accept only P5.655 billion out of the P8.5 billion that were tendered.

Political uncertainties have intensified with the national elections only three months away. The budget deficit data, which will be released later this month, has also been a source of concern for market players.

Finance Secretary Margarito Teves earlier said the 2009 budget deficit should be around P290 billion.

The Finance Department has released the quarterly fiscal program for 2010 that set budget shortfall at about P293 billion.

Domestic inflation continued to be a major factor affecting the behavior of the market players. Although domestic consumer prices still remain within target, they are expected to rise in the coming months, partly due to election-related spending.

Analysts said the emerging inflation outlook would weigh on the rates of the debt papers, which started to go up slightly since last December. Domestic prices rose to 4.4 percent in December from 2.8 percent in November due primarily to rising oil prices and the adverse impact of typhoons that damaged crop farms. –Elaine R. Alanguilan, Manila Standard Today