T-bill rates hit record lows

Rates of Treasury bill dropped to record lows in Monday’s auction amid the excess liquidity in the financial system and the decision of Standard & Poor’s to upgrade the country’s foreign debt rating.

The 91-day benchmark rate that banks use to price loans sank to 1.48 percent, the lowest since at least 1990, from 3.4 percent in the previous auction. The 182-day average yield declined to 1.983 percent from 3.941 percent and the 364-day rate slid to 2.394 percent from 4.165 percent. The Treasury sold P7 billion worth of offering against the total bids of P46 billion.

Deputy Treasurer Eduardo Mendiola told reporters Monday that the rate for the three-month government securities was the lowest that he has seen since he started conducting auctions at the Bureau of Treasury in 1995.

“The bases for the very favorable rates are the macroeconomic fundamentals, including the benign inflation, and the fact that policy rates were kept steady,” he said. “The high level of liquidity in the market is also prompting investors to look for government securities that they can invest in given the limited supply in the market.”

The auction was the second to the last to be conducted by the Treasury for the year.

Mendiola said Monday’s rates were lower than the done deals in the secondary market, where debt papers are being traded.

“I’d like to believe the credit rating upgrade also contributed to the good results. It should have a positive impact on the market,” he said.

Standard & Poor’s upgraded the country’s credit rating by one notch last week. Finance Secretary Cesar Purisima said the upgrade was a vote of confidence to the government.

Mendiola said it would now be difficult to push rates higher once they touched levels these low based on the usual behavior of the market.

“I think these rates would persist for as long as the macroeconomic fundamentals are holding at their current state. We are hoping the low rates in the short-term debt would also translate into the longer end of our issuances,” said Mendiola. –Elaine R. Alanguilan, Manila Standard Today