Treasury bill rates plunge

Treasury bill rates fell steeply yesterday due to strong demand on the back of easing inflation and possible further rate cuts by the Bangko Sentral, National Treasurer Roberto Tan said.

The yield of the 91-day T-bills plunged 112.2 basis points to 5 percent from 6.122 percent on Dec. 8 as tenders for the P1-billion issuance reached P3.59 billion.

Rate of the 182-day debt papers dropped 145 basis points to 5.248 percent from 6.700 percent on Nov. 24 as bids for the P2.5-billion offering amounted to P7.43 billion.

The 364-day T-bills, meanwhile, fetched 5.373 percent, down sharply by 104 basis points from the average of 6.414 percent on Dec. 8. Tenders reached P11.35 billion, with the auction committee of the Bureau of Treasury making a full award of P3.5 billion.

Tan said investors swarmed yesterday’s auction after the successful sale of $1.5 billion worth of US dollar-denominated sovereign benchmark bonds due June 17, 2019 last week, completing the government’s foreign commercial borrowing program.

“It signals that there are new funds coming in for the government and therefore demand for funding is not as high as it could have been,” Tan said. Bids yesterday reached P22.35 billion, or more than three times the issue size of P7 billion.

He said there was liquidity in the market as P16 billion worth of debt papers were scheduled to mature this year.

Tan said investors were also expecting the central bank to further slash its key policy rates due to easing inflation.

On Dec. 18, the central bank’s Monetary Board reduced its key policy rates by 50 basis points, bringing the overnight borrowing rate to 5.5 percent and the overnight lending rate to 7.5 percent after inflation eased to 8 percent in December from a 17-year high of 12.5 percent in August.

“There is a lot of liquidity and there is also the benign inflation and the expectation of the policy response of the BSP,” Tan said.

The Philippines in May last year abandoned its commitment to balance the budget and postpone fiscal consolidation back to the original 2010 schedule due to adverse external developments brought about by high oil and food prices.

It is now staring at a budget shortfall of P102 billion, or 1.2 percent of the gross domestic product this year, from P75 billion in 2007 due to the global economic slowdown.

Finance Secretary Margarito Teves said the deficit last year would likely be below the P75-billion ceiling after the government booked P21.3 billion from the sale of its remaining stake in Petron Corp. and P13 billion in royalties paid by the proponents of the Malampaya natural gas project led by Shell Philippines Exploration BV and Chevron Texaco.–Lawrence Agcaoili, Manila Standard Today