T-bill rates plunge to new record lows

MANILA, Philippines – Treasury bill (T-bill) rates declined to new record lows on the back of the huge improvement in the country’s fiscal position as well as strong liquidity in the financial system. This prompted the Bureau of Treasury to open a tap facility to sell an extra P9 billion worth of debt papers after investors swarmed yesterday’s auction.

The benchmark 91-day T-bills, used by banks in pricing their loans, fell by 22 basis points to 0.680 percent, a new record low yesterday, from 0.900 percent last April 4. This was also the lowest yield since the three-month T-bills fetched 0.700 percent last Jan. 10.

On the other hand, the 182-day debt papers fetched a new all-time low of 0.898 percent or 30.7 basis points lower than the previous average of 1.125 percent while the yield of 364-day T-bills hit a new record low of 1.968 percent or 22.3 basis points lower than the previous yield of 2.191 percent.

“It was a pleasant surprise,” Deputy Treasurer Eduardo Mendiola told reporters about the sharp drop in T-bill rates yesterday.

He said the market is awash with liquidity as P26 billion worth of T-bills are scheduled to mature tomorrow.

Mendiola pointed out that tenders for the 91-, 182-, and 364-day T-bills reached P30.935 billion yesterday or more than three times the issue size of P9 billion.

Tenders for the three-month debt paper reached P7.568 billion and the auction committee accepted P2.1 billion instead of onl.y P1.5 billion.

Bids for the six-month T-bills amounted to P11.867 billion and the committee made a full award of P3.5 billion while tenders for the one-year debt paper amounted to P11.5 billion of which the committee made a full award of P4 billion.

To give investors a chance, Mendiola announced that the bureau decided to open a tap facility where it intends to sell P1.5 billion worth of 91-day T-bills, P3.5 billion worth of 182-day T-bills, and P4 billion worth of 364-day T-bills due to the significant volume of tenders in yesterday’s auction.

He explained that the debt papers would be sold over-the-counter to interested investors.

Apart from the strong liquidity, Mendiola explained that investors also recognized the improvement in the country’s fiscal position as the Aquino administration managed to trim the budget deficit P8.1 billion in the first two months of the year from P70.3 billion in the same period last year.

He said that the budget shortfall incurred in the first two months of the year was well within the programmed deficit of P112 billion for the first quarter of the year.

Furthermore, investors also expect the Bangko Sentral ng Pilipinas (BSP) to keep interest rates steady after jacking up its key policy rates by 25 basis points last March 24 as a preemptive move to keep inflation expectations well anchored amid escalating global oil and food prices.

“Inflation is good and I don’t think the BSP will raise interest rates this May,” he said.

The next policy rate setting meeting of the BSP’s Monetary Board is scheduled on May 5.

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. –Lawrence Agcaoili (The Philippine Star)