Benchmark interest rates climb

BENCHMARK interest rates went up on Tuesday’s auction of Treasury bills (T-bills) ahead of the government’s planned borrowing through the sale of retail Treasury bonds (RTBs) next week.

The rise in T-bill rates also comes on the heels of the Bangko Sentral ng Pilipinas’ statement that inflation last month may have hit the bottom at 0.1 percent, indicating that prices of goods and services may pick up in the coming months.

The government plans to raise at least P25 billion from the sale of the debt papers, which would be in three tenors: three, five and seven years. It would issue P10-billion worth of three- and five-year RTBs and P5 billion of seven-year bonds.

Unlike regular Treasury bonds, RTBs cater to small investors because they can buy the government security for as little as P5,000.

“We have to look at [the] borrowing differential. We’ll adjust it accordingly,” National Treasurer Roberto Tan said when asked what the impact of the RTBs would be on the government’s fourth-quarter borrowing plan.

The government borrows money through the sale of Treasury papers in the local market, as well as sovereign bonds in the international market, to make up for tax collection shortfalls.

The government was forced to resort to more borrowings this year after it raised its budget deficit ceiling to P250 billion from the previous P199.2 billion.

Besides its weekly auction of peso-denominated debt instruments, the government has embarked on at least two successful global bond floats in the last six months. One was in January worth $1.5 billion, while the second was last month’s $750 million.

In the last six months, government borrowings fell by 2.3 percent to P237.18 billion, down by P5.58 billion from P242.76 billion in the same period last year.

During Tuesday’s auction of T-bills, the average rate for the 91-day IOU reached 3.992 percent, or 4.4 basis points higher than the previous rate of 3.948 percent when the debt paper was last auctioned off on August 24.

The national government made a partial award of the three-month paper, raising P1.099 billion or less than the offer size of P2 billion, even though investors were willing to buy as much as P3.269 billion.

The average rate for the 182-day T-bill reached 4.194, or 7.3 basis points higher than the previous rate of 4.121 percent when it was last auctioned off also on August 24.

The government fully awarded the P3-billion worth of debt papers on offer even as banks were willing to buy as much as P5.250 billion of the IOUs.

The rate for the 364-day T-bill went up 3.7 basis points to an average of 4.375 percent from the previous rate of 4.338 percent when the debt instrument was last auctioned of on August 24.

“The rates are very much [in line] with the secondary market rates,” Tan said.

Secondary-market rates for the three-month, six-month and one-year debt instruments were last quoted at 4 percent, 4.24 percent, 4.45 percent, respectively. –Lailany P. Gomez, Reporter, Manila Times