Banks’ tenders show increasing risk aversion
By Paolo G. Montecillo
Philippine Daily Inquirer
12:09 am | Tuesday, May 6th, 2014
INQUIRER FILE PHOTO
Bids for six-month and one-year treasury bills were rejected Monday as officials shot down traders’ attempts to make the government pay more for the money it borrows.
The Bureau of the Treasury accepted P8 billion worth of bids for the 91-day bills after rates for the government securities with the shortest maturity declined. Demand for the three-month securities were highest among all paper auctioned Monday. Rates for the 182-day and 364-day bills, meanwhile, would have gone higher had the Treasury accepted all bids.
A total of P20 billion in treasury bills were up for auction but less than half was awarded.
“We accepted an increase last time. This time, we didn’t feel like it. [Their bids] were wrongly priced,” said Finance Undersecretary Gil Beltran, who chaired the auction.
The pressure on rates to go up at the latest auction suggests higher risk aversion as banks sought higher premiums, particularly for paper with longer maturities. Treasury bills and longer-term bonds are among the safest forms of assets that banks can hold. These are used by lenders as their benchmarks for pricing other loans to their clients.
Beltran said the Treasury would have been comfortable with rates going up for the six-month and one-year bills. “[But] we think the pricing is too high relative to the interpolated government securities [yields],” Beltran said.
The rate for 91-day bills declined by 9.4 basis points to 1.346 percent. The Treasury awarded the full P8 billion it intended to auction, although tenders reached P20.41 billion.
Tenders for six-month bills reached P10.16 billion or higher than the P6 billion up for sale. For the one-year bills, tenders reached P12 billion or more than double the P6-billion quota.
Had the Treasury accepted the bids, rates for the 182-day paper would have increased by 18.9 basis points to 1.885 percent while that for the 364-day securities would have climbed 21.2 basis points to 2.184 percent.
The increase in rates comes ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting this Thursday. All analysts, based on an Inquirer poll last week, said monetary authorities were expected to mop up more liquidity from the system through another increase in deposit reserve requirements for banks.
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Tags: Business , rejection , risk aversion , treasury bills
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