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T-bill rates up as market reacts to BSP rate hike |
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By Rocel C. Felix
The Philippine Star 10/25/2005 Treasury bill (T-bill) rates went up slightly across the board yesterday as the market responded to the Bangko Sentral ng Pilipinas’ (BSP) move last week to raise key policy rates to temper inflationary pressures and siphon excess liquidity in the market. In a move that surprised the market, the Monetary Board adjusted its key policy rates for the third time this year. The overnight borrowing rate was adjusted by 25 basis points to 7.5 percent and 9.75 percent for the overnight lending rate. "The market reacted not only to the BSP move but also took a constructive view of the improved fiscal position alongside the existing liquidity of banks," said National Treasurer Omar Cruz, noting the oversubscription in yesterday’s auction. Total tenders yesterday amounted to P20.11 billion with government accepting only P3.7 billion. The 91-day T-bill went up 5.847 percent from 5.818 percent in the previous week. The 182-day tenor also went up 7.899 percent from 7.883 percent last week, while the 360-day T-bill was at 8.952 percent from 8.928 percent. For the 91-day T-bill, the Bureau of Treasury (BTr) accepted bids worth P915 million and rejected bids of P3.79 billion. The 182-day T-bill fetched tenders of P8.845 billion but government accepted only P1.35 billion. On the other hand, investors offered to buy P6.570 billion but government accepted tenders of only P1.435 billion. Market analysts noted that the marginal increase in T-bill rates was tempered by excess liquidity in the system and the BTr’s decision to make partial awards. "We still have excess liquidity because government is ahead of its borrowing program, this gives us the flexibility that we need. The market moved sideways and we accepted where the market is trading, there is liquidity along with a weak demand while the impact of the peso is still strong," said Cruz. He noted that the government is also ahead of its borrowing program, but stressed it has not yet overborrowed. "Given the current government cash flow position, government may cancel its December T-bill and bond auctions because it has enough funds to finance operations and its budget deficit. The government plans to sell P9 billion 91-day, 182-day and 364-day T-bills in the first two weeks of December. It will also sell P8 billion of bonds due in five years and 10 years during the period, according to a schedule from the BTr. A reduction in the debt sales will help the government cap rising borrowing costs after the BSP increased its key rates. Lower yields on its debt will help the government allocate more funds to build roads, school buildings and other infrastructure to spur growth. "Treasury bill rates may remain stable despite the bias of the BSP to further raise its interest rates," said Jonathan Ravelas, market strategist at Banco de Oro. The reduction in government borrowings " goes to show there’s fiscal order.’’ The govenment can reduce debt sales because the budget deficit may be less than the P180 billion official target for the year, Cruz said. The deficit totaled P108.5 billion. |
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