snap up, smack that

Traders see lower 91-day and one-year T-bill rates, stronger peso
BWorld/12.08.08

BANKS are expected to snap up 91-day Treasury bills, which the government auctions today.

Yields from the three-month debt paper are expected to come off multi-year peaks and should range from a low of 5.75% to a high of 6.25% at today’s auction, the last for the year, traders said.

While higher than the 5.699% these IOUs fetched last July 7, when they were last successfully sold, the projected bids are better than secondary market rates and those demanded by banks in past two 91-day T-bill auctions this quarter, which all failed.

The 91-day paper was last quoted at 5.875% to 6% in the secondary market, although there have not been many done deals on this paper, traders said.

Today’s auction of P5 billion worth of papers caps the government’s domestic borrowing for 2008, as financial markets prepare for a long Christmas holiday that kicks off the week after next.

Of the planned P5 billion offer, half is of one-year T-bills, which will likely fetch between 6.5% to 7%, traders said. The one-year securities were last sold for 7.111% in a Nov. 24 auction.

Better-than-expected inflation in November, which showed the rise in consumer prices easing to the single-digit level at 9.9%, allowed bond prices to rally and interest rates to fall by up to 30 basis points last Friday, traders said.

This bodes well for a rate cut by the policymaking Monetary Board, when it meets on Dec. 18, traders said.

"Secondary market rates fell because of the bullish sentiment due to inflation that is no longer in double-digit territory.

"It gives the BSP [Bangko Sentral ng Pilipinas] reason to cut its overnight rates this month. The monetary policy stance will be from neutral to easing," a trader said.

The same bullish sentiment should spill over to the peso, which will likely appreciate further near the P48-per-dollar territory. The local currency closed at P49.08 per dollar last Friday.

Money sent home by Filipinos working and living abroad, which is expected to surge in the countdown to Christmas day, continue to provide the peso a tailwind, analysts said.

"We’ll still be trading around these levels because we can still feel the effect of inflows from overseas," Asterio L. Favis, Jr., Sterling Bank executive vice president and treasurer, said.

For Marcelo E. Ayes, Rizal Commercial Banking Corp. senior vice president , the peso should trade between P48.75 and P49.30 against the dollar this week. — M. E. I. Calderon