Benchmark short-term interest rates ease

BENCHMARK short-term interest rates inched lower across all tenors Monday.

This as the Bureau of Treasury announced that the Japan Bank for International Cooperation (JBIC) is ready to sign the guarantee agreement for the Philippines’ planned Samurai bond offering. National Treasurer Roberto Tan said the signing “may happen this year.”

The Philippines has been planning to issue Samurai bonds to pre-fund its fiscal requirements next year, as it expects to incur a revenue shortfall of P233 billion.

A Samurai bond is a yen-denominated debt paper issued in Japan by a foreign borrower. Borrowing from the Japanese through the sale of bonds in their market surged during that country’s so-called lost decade, when the world’s second-biggest economy fell into deflation, characterized by ultra-low interest rates and a flood of money that had nowhere else to go.

If there’s no change in market appetite, the Japanese market can “readily absorb” only $500 million although the government is entitled to sell at least $1.5 billion, Tan said.

On Monday’s auction of Treasury bills, “the bids were very much competitive and they just moved sideways against our previous auction,” Tan told reporters.

The 91-day Treasury bill fetched 3.794 percent, 3 basis points lower than the 3.824 percent the IOU fetched on November 9. The six-month T-bill registered a 4.7 basis points decline, dipping to 4.090 percent from 4.137 percent, while the one-year T-bill fetched 4.499 percent, or 4 basis points higher than the 4.459 percent also on November 9.

Bids for the three-month and six-month debt papers were four times oversubscribed, showing high demand from investors.

The government fully awarded the P6.5-billion worth of IOUs, as the issuance was oversubscribed with total tenders reaching P17.54 billion, indicating substantial liquidity in the market, Tan said.

“That’s their [banks’] reference. Because there are factors like [the budget] deficit,” he said.

Bids for the three-month notes reached P4.24 billion against a P1-billion offer. The 182-day had P8.41 billion in total tenders, more than quadruple the P2 billion offer, while the 364 day received P4.89 billion in tenders against a P3.5 billion offer.

Secondary market rates for the three-month, six-month and one-year debt instruments were last quoted at 4 percent, 4.18 percent and 4.48 percent, respectively.

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. –LAILANY P. GOMEZ REPORTER, Manila Times