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Treasury may cancel auction of T-bills |
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(04 February 2004, Wednesday - Philippine Daily Inquirer)
By Clarissa S. Batino THE BUREAU of Treasury said Tuesday it might cancel the auction of regular Treasury bonds and instead focus on selling 10-and 20-year bonds in the quarter ending March if the market would continue pushing interest rates up. |
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Deputy Treasurer Mina Figueroa said the government might also consider other fund-raising alternatives, such as offering Retail Treasury Bonds, as strong pressure from the market kept pushing up the yields on regular Treasury bills.
"If the market continues to remain volatile while we know that it is still very liquid, we will consider our options," she said. Interest rates on three-month, six-month and one-year T-bills went up during the auction last Monday. The rate on five-year bonds went up by 8.7 basis points to an average of 10.87 percent, from 10.783 percent a month ago. To cap the increase in rates, the Treasury-led auction committee rejected high bids and accepted only 2.74 billion pesos' worth of bids, although the bonds for sale amounted to 4.5 billion pesos. Offers reached 9.197 billion pesos, indicating that the market continued to hold big amounts of cash but wanted higher returns for the funds it would lend to the government. Most bids were at 11 percent, Figueroa said. The rates on the secondary market averaged about 11.06 percent. "Because of the political uncertainties, we know that the first half would be difficult," the deputy national treasurer said. "However, we will not allow a drastic increase in rates. We can reject offers or resort to other debt instruments that we think will be more attractive to the market like long-term bonds." Figueroa said the Treasury could scrap the auction of any of the two-, three-, four-, five- and seven-year bonds. "We can sell only 10s and 20s in the first quarter," she said. "There is demand for long-term debt paper, particularly among insurance firms." She said she knew the market was still liquid but that political jitters were giving banks a reason to bid the rates up. "We accepted only the rates aligned to the secondary market on five-year bonds," she said. "We have to reject the rest. The political uncertainty is causing volatility in the market." As the peso remains volatile, Figueroa said, the financial market is anticipating that the central bank will raise overnight rates or the reserve requirement to buoy the local currency. If that happens, the market will have more reason to demand higher rates on Treasury bonds. "The market has been anticipating a BSP [Bangko Sentral ng Pilipinas] action, so it has been pushing the rates up," Figueroa said. The central bank's overnight rates are 6.75 percent for borrowing and 9.00 percent for lending. Banks' reserve requirement remains at 17 percent of deposit holdings. home | latest news |
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