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Treasury bills down across the board |
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By Des Ferriols
The Philippine Star 05/04/2005 Awash with liquidity, the market sent interest rates down across the board as treasury officials decided to make a full award at yesterday’s auction to take advantage of lower borrowing costs. Rates for the benchmark 91-day Treasury bills (T-bills) went down to 6.319 percent from 6.551 percent a week ago while that of the 182-day notes softened to 7.574 percent from the previous week’s 7.727 percent. The rate for the 364-day T-bills also declined to 8.533 percent from 8.678 percent last week. According to National Treasurer Omar Cruz, the market had excess liquidity and the demand for T-bills sent rates going down across the board. The drop in interest rates came despite mounting concerns over the possibility of failure of Congress to pass the proposed increase in value added tax (VAT) rate. The market has been counting on the VAT rate increase to improve the government’s fiscal position and eventually reduce the pressure to borrow and add to the already serious public debt burden. The National Power Corp. (Napocor) was also scheduled to float some P5-billion worth of bonds next week with an option to float another P2 billion. According to Cruz, however, the government was prepared to reject the bids if the terms prove to be too expensive. Cruz said the market still expects interest rates to stabilize at these levels although the market was still expecting the Senate and the house of Representatives to ratify the amendments to the value-added tax law that would further boost government revenues. The optimism is tempered only by the conditions in the international credit market that officials said were still too hostile for emerging markets. With so much hostility in the market, Cruz said the National Government is likely to wait it out until the situation settled down. Finance officials have been holding off plans to raise more funds from the international market, even getting the Monetary Board to approve a planned euro-bond float right after Congress approves the proposed increase in the value added tax (VAT) rate. According to Cruz, however, even if the Congress manages somehow to pass the amendments to the VAT law, the market would still be too hostile for foreign borrowing. |
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