Philippine Six-Month T-Bill Rate Falls to Record on Peso Bets

The Philippine government’s borrowing costs for six months dropped to a record at a second monthly auction as overseas investors bet the peso will appreciate, according to Treasurer Rosalia de Leon.

The average rate on the 182-day Treasury bills fell 8.9 basis points to 0.001 percent compared with the last auction on Oct. 7, while that on 91-day Treasury bills stayed at an precedented low of 0.001 percent, government data show.

Remittances typically rise in the fourth quarter when Filipinos living abroad send more money home for the Christmas holidays. The peso has just gained 0.6 percent since Sept. 18, when the U.S. Federal Reserve unexpectedly decided to maintain monetary stimulus that has fueled demand for emerging-market assets. Bangko Sentral ng Pilipinas is watching capital flows, Governor Amando Tetangco told Bloomberg Television on Oct. 25.

“Demand for short term-IOUs are mostly from offshore,” de Leon told reporters in Manila today. “They’re here because of their view that the peso will appreciate. So, it’s more of a currency play. They just park their funds in short-term” instruments, she said.

The yield on 364-day notes increased 8.8 basis points to an average of 0.278 percent. The Philippines will consider issuing its first inflation-linked bonds in 2014, de Leon said.

Consumer-price gains may reach 3 percent this year and 3.8 percent in 2014, which would be the fastest pace since 2011, according to the median estimates of economists surveyed by Bloomberg.

The rally in the 364-day bill rate incorporates inflation expectations one year from now, said Jan Briace Santos, a fixed-income portfolio manager who helps manage the equivalent of $17 billion at BPI Asset Management Inc. in Manila.

Investors submitted bids totaling 92 billion pesos ($2.1 billion) for the 20 billion pesos of notes offered, of which 17.4 billion pesos were awarded, the Bureau of Treasury said.

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