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BTr rejects all T-bill bids for being high |
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BTr rejects all T-bill bids for being high
By Des Ferriols The Philippine Star 03/29/2005 The Bureau of Treasury (BTr) rejected yesterday all bid applications for government Treasury bills (T-bill) as banks attempted to jack up domestic interest rates in anticipation of a rise in key interest rates. National Treasurer Omar Cruz said the market is liquid so there should not have been any reason to bid high on government securities even after the decision of the US Federal Open Market Committee to raise its interest rate. "The market is globally, regionally and locally liquid," Cruz said. "If they (banks) raise the bids, I will reject (them). I know my liquidity, I am way ahead of them." If the auction committee had not rejected yesterday’s bids, the average interest rates on the bellwether 91-day T-bill would have gone up to 6.926 percent. On the other hand, the rate on the 182-day notes would have gone up to 8.113 percent and the rate on the one-year or 365-day notes would have gone up to 8.973 percent. Government’s decision to reject all bids was made easier by its $1.5-billion global bond float in January which proceeds were booked in February. Cruz said the market’s aggressiveness stemmed from the anticipation of the BSP’s next policy meeting where the Monetary Board is expected to finally take action after the FOMC raised US interest rates and hinted on further and possibly bolder adjustments in the future. The increase in US federal rates was expected to finally push the BSP to take action for the first time since 2003 and adjust its own policy rates in anticipation of rising global and domestic inflation rates. According to sources from the Monetary Board, the FOMC decision might finally push the divided board towards adjusting its monetary policy by either increased the policy or increasing the liquidity reserves of banks or adjusting both. "It really depends on how the market will react, especially since we have to consider the fact that oil prices have continued to rise," said the MB source. "Now we have look at the possible increase in interest rates abroad." According to Cruz, however, there might be a let-up in market expectations since inflation rates are projected to decline. The Monetary Board is scheduled to meet early next month specifically to discuss monetary policy. The Board has so far been firm on its decision to wait for more definite signs of demand-related inflationary pressures, saying repeatedly that adjusting rates would not solve supply-side pressures. According to BSP Deputy Governor Amando M. Tetangco the MB would still have to look exactly how prices have been behaving and whether there was an actual tendency to go up across the board. Tetangco noted that the FOMC used a language that still referred to the "measured adjustment" in US rates while also acknowledging inflationary pressures in the US. |
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