Treasury caps T-bill rate hike; 91-day tenor up 37.5 bps

MANILA, Philippines – The Bureau of Treasury (BTr) yesterday capped the increase in the yields of Treasury bills (T-bills) after the government announced that the country’s economic expansion slowed down in the first quarter of the year.

The benchmark 91-day T-bills, used by banks in pricing their loans, jumped 37.5 basis points to 2.264 percent from 1.889 percent last May 16. Tenders for the three-month debt papers reached P3.09 billion but the auction committee accepted only P1.06 billion.

Had the committee accepted all the bids for the P1.5 billion offering, the 91-day government securities would have increased by 41.6 basis points to 2.305 percent.

On the other hand, the yield for the 182-day T-bills went up by 149.4 basis points to 2.444 percent from 0.950 percent last May 2. Bids for the P3.5 billion offering for the six-month government securities amounted to P4.55 billion.

The auction committee made a partial award of P500 million since the rates would have gone up by 1.827 percent.

The BTr also rejected all the bids for 364-day T-bills. Tenders for the P4.5 billion offering reached P4.55 billion. Had the committee accepted the bids, the yield of the one-year debt paper would have gone up by 89.3 basis points to 2.925 percent from 2.032 percent last May 2.

National Treasurer Roberto Tan told reporters after yesterday’s auction that the committee just aligned the T-bill rates with the rates in the secondary market and the interest rates imposed by the Bangko Sentral ng Pilipinas (BSP).

“We just adjusted the rates based on the secondary rates. We are aligning our rates with the BSP rates,” he added.

Tenders for the P9.5 billion offering reached P12.19 billion.

“Tenders are slightly up showing there is activity in the market,” Tan added.

The BSP has so far raised interest rates by 50 basis points in two consecutive policy rate setting meetings in March and May as a pre-emptive move to keep inflation expectations well anchored amid rising oil and commodity prices in the world market.

The board jacked up its key policy rates by 25 basis points last March 24 and by another 25 basis points last May 5 bringing the overnight borrowing rate to 4.50 percent and the overnight lending rate to 6.50 percent.

Inflation shot up to a one-year high of 4.5 percent in April from 4.3 percent in March bringing the average inflation to 4.2 percent in the first four months of the year from 4.3 percent in the same period last year.

The BSP sees inflation this month averaging between 4.5 percent and 5.5 percent breaching the higher-end of the central bank’s full-year target of three percent to five percent.

The Philippines borrows heavily from foreign and domestic creditors to rein in the country’s ballooning budget deficit. It hopes to trim the deficit to P300 billion or 3.2 percent of gross domestic product (GDP) this year from a record level of P314.5 billion or 3.7 percent of GDP last year.

Socioeconomic Planning Secretary Cayetano Paderanga announced yesterday that the country’s GDP growth slowed down to 4.9 percent from the revised 8.4 percent in the same quarter last year due to modest government spending and a slowdown in global trade.

The country’s GDP — the amount of goods and services produced by a country in a given period-posted its fastest growth in 34 years after expanding by 7.6 percent last year from 1.1 percent in 2009.

The Cabinet-level Development Budget Coordination Committee (DBCC) sees the country’s GDP growing between seven percent and eight percent this year. –Lawrence Agcaoili (The Philippine Star)