Treasury bill rates down across the board

MANILA, Philippines – After the 25-point cut in the Bangko Sentral ng Pilipinas’ rates last week, Treasury bill (T-bill) rates fell across the board yesterday with the benchmark 91-day rate falling to an average of 4.287 percent.

Driven out of their parking spaces with the central bank, funds looked for other places to go and the surge in demand for government securities forced rates to go down across all tenors.

The yield of the 91-day T-bills – used by banks in pricing their loans – declined by 6.5 basis points to 4.287 percent from 4.352 percent at the last auction on April 7.

The government offered only P1.5 billion worth of 91-day T-bills but bids soared to P5.675 billion.

The 182-day debt papers, on the other hand, fetched 4.434 percent – 10.7 basis points lower compared to 4.541 percent last April 7. Bids reached P9.855 billion or almost four times the issue size of P2.5 billion.

Finally, the 364-day government securities averaged 4.620 percent or nine basis points lower compared to 4.710 percent. Tenders reached P9.728 billion and the committee made a full award of P3.5 billion.

National Treasurer Roberto Tan told reporters that the decline in the T-bill rates resulted from the reduction of overnight borrowing and overnight lending rates by the central bank’s Monetary Board last week.

“The biggest factor was the BSP rate cut and there is also benign inflation,” Tan said. “There was an apparent shift in funding placements.”

The Bangko Sentral ng Pilipinas (BSP) has already cut its policy rates by a total of 150 basis points in the last five months, bringing the overnight borrowing rate down to 4.5 percent.

The overnight borrowing rate or the reverse repurchase rate (RRP) is now within 37.5-basis points from the next lowest level on record of 4.125 percent that was last seen in May 1992.

Tan said investors swarmed yesterday’s auction as tenders across all tenors reached P25.258 billion or almost three and a half times the issue size of P7.5 billion.

Yesterday’s market reaction to the T-bills auction completely ignored the fact that economic officials have been forced to allow a higher budget deficit ceiling mainly because revenue collections are expected to drop at a time when government spending was planned to increase.

The country’s growth targets have already been downscaled and public debt is expected to go up but the overall resilience of the economy against the global recession has only tempered the outlook on the country’s medium-term prospects.

The latest drop in the benchmark 91-day T-bill rate kept the country’s real interest rate firmly in negative territory because inflation rate is still higher than nominal interest rate. –Des Ferriols, Philippine Star