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Bellwether T-bill rate continues slide |
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By Des Ferriols
The Philippine Star 05/31/2005 Rates on the benchmark 91-day Treasury bills (T-bills) continued to soften yesterday, spawning speculations that the Bangko Sentral ng Pilipinas (BSP) may consider cutting its own interest rates to track the market. Yield rates dropped further to 5.767 percent for the 91-day and 6.817 percent for the 183-day T-bills while the average interest rate on the 365-day bills went up slightly from 7.895 percent last week to 7.934 percent. National Treasurer Omar Cruz told reporters yesterday that market sentiments picked up dramatically following the upgrade of the country’s credit rating outlook from "negative" to "stable" by the London-based Fitch Ratings. According to Cruz, the anticipated relief from the increase in the value added tax (VAT) rate had generated fresh optimism. "The market is liquid and optimistic," Cruz said. "So the decline in interest rates is to be expected." After yesterday’s auction, the interest rate on the benchmark 91-day T-bills is now way below the policy rates of the Bangko Sentral ng Pilipinas (BSP). The BSP’s overnight borrowing or reverse repurchase (RRP) rate is now at seven percent while the overnight lending or repurchase (RP) rate is now at 9.75 percent. The market was quick to speculate that the BSP may soon consider the possibility of cutting its policy rates but Cruz was non-committal about whether it was being considered by the Monetary Board. Cruz sits in the MB as the permanent representative of Finance Secretary Cesar V. Purisima who was appointed ex-oficio member when he took over the Department of Finance (DOF). "We can not speculate," Cruz said. "Let’s just see what happens." The MB is scheduled to hold its regular policy meeting this Thursday but even BSP Deputy Governor Amando M. Tetangco would not comment on fresh speculations that there could be a rate cut in the wake of the sustained decline in the rates for the bellwether T-bills. The MB had repeatedly explained that its policy rates were dictated by inflationary expectations 14 months down the road and one of the factors considered is also the interest rate differentials between US and Philippine interest rates. As the US Federal Open Market Committee (FOMC) continued to cut its own rates, the BSP was unlikely to cut its own rates since this would shrink the differential even further. Until banks resume their lending activities in earnest, Cruz said their funds would have nowhere to go other than government securities. |
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