I have to wonder...why would anyone put money in US t-bills at .16% when they could get 27 times more interest at 4.383% I mean... yeah you are exposed to the exchange rate, but isnt it worth the risk? http://www.dof.gov.ph/pressroom.asp?sec=news&id=170
Fear the Philippine peso will drop more than 5% relative to the major currencies in 91 days? It looks like their currency has lost about 10% to the EUR since Feb18.
Kinda stacking the deck against the peso there arent ya? i could go back a year and say that the peso GAINED almost 10% to the euro if you look at from july 14, 2008 to today. Also, i was comparing the peso to the US treasuries, not european treasuries and if you use your "random" feb 18 date, you will see the peso gained an extra 1.3% on the dollar. And even though you say that the peso lost 10% to the euro since feb 18, the euro lost 12.8% to the dollar in that same time frame. Currencies fluctuate...yeah there is some risk the currency could go against you, but you buy 500,000 PHP, in 91 days you are getting 505,475 pesos back no matter which way you cut it. You can always buy back into another t-bill. Just seems like the way the american economy is going, people would be fleeing to higher interest treasuries in other countries and take advantage of a falling dollar.
This time last year, 3 month t-bills were about 6% (5.895%) The yield in the secondary market was 6.17% though. Also...sometimes the philippine government changes its mind at the last second and decides not to sell any bills if they have plenty of money even if they have plenty of bids for bills.
The way things are going in the U.S., it might just work with the USD. Obviously, unless you're doing a TA, what happened before you went long is immaterial and you would need to gauge the devaluation of their currency at your entry point. Rolling over your profits until the exchange rates move in your favor, and therefore increasing your exposure to a possible default, sounds like one helluva complex game to me.
Are you going to take a position on these bonds or what? Worried PIMCO will be on the opposite side of the trade, no matter what you do? I'm curious to see how it works out.
Hahahaha, why look at Philippines? I hear that Latvian T-bills have been going cheap... That's the place to invest, if you're bold...