Early signs show gov’t may miss 2007 inflation target
By Des Ferriols
The Philippine Star 01/30/2006
After conceding early on that it would miss its 2006 inflation target, the Bangko Sentral ng Pilipinas (BSP) said over the weekend it is likely that the 2007 inflation target will be breached as well.
The BSP said there would be a "slight breach" in the government’s 2007 inflation target of four to five percent although monetary officials said there was still time and opportunity to take steps to contain the breach.
BSP Deputy Governor Diwa Guinigundo told reporters that the projections made by the BSP’s Department of Economic Research (DER) only estimated price movements assuming that the BSP did not take any steps to curb inflation.
"If we decide not to do anything then there could be a slight breach," Guinigundo said. "But at this point there is still time, we can still take steps."
According to Guinigundo, the fluctuations in the world oil prices still posed the biggest risk to inflation, considering the shifting geo-political conditions that could further tighten global oil supply.
"The Monetary Board may opt to undertake future tightening of its monetary policies if necessary, depending on how quickly the risks will escalate," Guinigundo said.
For 2006, the government’s inflation target was at 5-6 percent and it has been conceded that this target will be breached given the skyrocketing oil prices in 2005.
Since monetary policies take at least 18 months to filter through the system, BSP actions this year would only impact inflation in 2007.
The 2007 inflation target has already been adjusted from the original target of 3-4 percent after monetary officials decided the original range had become unrealistic.
In its first policy-setting meeting this year, the MB decided to hold its policy rates steady but Guinigundo said the rest of the year was still wide open.
"There is more than one factor to consider although oil prices pose the principal risk," Guinigundo said. "We are also looking at liquidity levels and inflows from overseas Filipino workers, equity investments and portfolio investments."
At the moment, Guinigundo said the BSP was assuming a growth rate of 10 percent for OFW remittances and if this growth rate turns out faster than anticipated, it could be necessary for the BSP to review its open market operations.
"We adjust that constantly anyway," he stressed. "But at the moment, our liquidity growth rate is even below our assumed rate of 13 percent. we’re somewhere at 11.9 percent only."
The 2007 scenario, however, would dictate how aggressive the BSP would be in its policy-setting this year.
"The downside factors are still oil prices and since we have assumed a certain wage hike, any increase beyond that assumption will have to be carefully assessed," he said.
Monday, January 30, 2006
Saturday, January 28, 2006
Inflation seen to hit 7.1% in January
Inflation seen to hit 7.1% in January
By Des Ferriols
The Philippine Star 01/28/2006
The national average inflation in January may hit 7.1 percent and monetary officials said they expect domestic prices to continue rising during the first half of the year.
The Bangko Sentral ng Pilipinas (BSP) said yesterday the increase in the prices of basic commodities is likely to push the inflation rate to 6.4 to 7.1 percent this month.
BSP Governor Amando M. Tetangco Jr. told reporters yesterday that the increase in inflation rate would be due mainly to the movements in domestic pump prices resulting from the volatility in world oil prices.
According to Tetangco, high inflation is expected particularly during the early months of the year and especially after the government increases the expanded value-added tax (EVAT) rate from 10 percent to 12 percent.
"But during the latter part of the year, we expect some easing in domestic prices," Tetangco said.
BSP Deputy Governor Diwa Guinigundo said there were still no indications that the BSP’s Monetary Board would need to take action against rising inflation.
"Right now, based on domestic liquidity growth, it doesn’t look like we have to do anything," Guinigundo said. "We were expecting domestic liquidity to grow by at least 13 percent and we are now at only 11.9 percent."
However, Guinigundo said the MB is keeping an eye on geo-political developments that might trigger another volatile run in world oil prices which was still the biggest threat to inflation expectations in 2006 and 2007.
"The MB may opt to undertake future tightening if necessary depending on how quickly the risks will escalate," Guinigundo said. "Oil is the principal risk but we are also looking at domestic wages, liquidity growth and inflow from abroad."
For 2006, the BSP’s inflation target is five to six percent and it has revised its 2005 target to four to five percent.
Tetangco said the new 2007 inflation target was consistent with the growth target of 6.1 percent to 6.5 percent, with a gradually decelerating path towards lower inflation rate.
The inflation target is set by the government which the BSP uses to set its monetary policy direction over a two-year horizon. The publicly-announced inflation target is intended also to guide for public’s expectations, and allow more predictable planning.
Tetangco said that the Monetary Board saw the balance of economic evidence that still supported an unchanged policy setting. "This is based on the prevailing combination of generally favorable supply and demand side factors," he said. "In particular the recent easing of energy prices, strengthening of the peso and the on-going harvest season in a relatively normal weather."
Depending on how fast the BSP intends to usher the national average inflation rate, the MB would have to position its monetary policies if the reduction will remain at its steep trajectory.
By Des Ferriols
The Philippine Star 01/28/2006
The national average inflation in January may hit 7.1 percent and monetary officials said they expect domestic prices to continue rising during the first half of the year.
The Bangko Sentral ng Pilipinas (BSP) said yesterday the increase in the prices of basic commodities is likely to push the inflation rate to 6.4 to 7.1 percent this month.
BSP Governor Amando M. Tetangco Jr. told reporters yesterday that the increase in inflation rate would be due mainly to the movements in domestic pump prices resulting from the volatility in world oil prices.
According to Tetangco, high inflation is expected particularly during the early months of the year and especially after the government increases the expanded value-added tax (EVAT) rate from 10 percent to 12 percent.
"But during the latter part of the year, we expect some easing in domestic prices," Tetangco said.
BSP Deputy Governor Diwa Guinigundo said there were still no indications that the BSP’s Monetary Board would need to take action against rising inflation.
"Right now, based on domestic liquidity growth, it doesn’t look like we have to do anything," Guinigundo said. "We were expecting domestic liquidity to grow by at least 13 percent and we are now at only 11.9 percent."
However, Guinigundo said the MB is keeping an eye on geo-political developments that might trigger another volatile run in world oil prices which was still the biggest threat to inflation expectations in 2006 and 2007.
"The MB may opt to undertake future tightening if necessary depending on how quickly the risks will escalate," Guinigundo said. "Oil is the principal risk but we are also looking at domestic wages, liquidity growth and inflow from abroad."
For 2006, the BSP’s inflation target is five to six percent and it has revised its 2005 target to four to five percent.
Tetangco said the new 2007 inflation target was consistent with the growth target of 6.1 percent to 6.5 percent, with a gradually decelerating path towards lower inflation rate.
The inflation target is set by the government which the BSP uses to set its monetary policy direction over a two-year horizon. The publicly-announced inflation target is intended also to guide for public’s expectations, and allow more predictable planning.
Tetangco said that the Monetary Board saw the balance of economic evidence that still supported an unchanged policy setting. "This is based on the prevailing combination of generally favorable supply and demand side factors," he said. "In particular the recent easing of energy prices, strengthening of the peso and the on-going harvest season in a relatively normal weather."
Depending on how fast the BSP intends to usher the national average inflation rate, the MB would have to position its monetary policies if the reduction will remain at its steep trajectory.
Thursday, January 26, 2006
Bright future seen for mutual fund industry
Bright future seen for mutual fund industry
By Zinnia B. Dela Peña
The Philippine Star 01/26/2006
The Mutual Fund Management Co. of the Philippines Inc.(MFMCP), an investment management company owned by ATR Kim-Eng Capital Partners Inc. and Clemente Fund Management (Asia) Ltd., is optimistic on the prospects of the mutual fund industry for this year given the improvement in the country’s fiscal and economic environment.
MFMCP is responsible for the advisory, distribution and administration of the Kabuhayan (Balanced) Mutual Fund, the ATR Kim-Eng Opportunity Fund and the ATR Kim Eng Fixed Income Fund.
It also oversees the GSIS Kinabukasan Fund, which gave investors a year-to-date return of 14.16 percent.
The ATR Kim Eng Equity Opportunity Fund, on the other hand, was the best performing equity fund in the country in 2005, giving a year-to-date return of 21.34 percent.
This return was 39.8 percent higher than the next best performing equity mutual fund (15.26 percent) and 46.4 percent higher than all Philippine index mutual funds (14.57 percent).
The ATR Kim Eng Fixed Income Fund was also the fifth best performing fixed income mutual fund with year-to-date return to investors of 7.38 percent. The company has successfully grown its business despite being new in the industry.
In 2003, its assets under management totaled around P300 million. It now manages funds totaling over half a billion pesos.
MFMCP president and chief executive officer Phillip Hagedorn said: "Currently, we favor equities. There are some good values in the stock market. The peso has strengthened, the business environment is getting more stable and with the 91-day treasury bill at just above five percent, equities are an attractive opportunity for the first quarter of this year."
Hagedorn said mutual funds contribute to the development of the capital market by pooling money from a large group of investors who have similar objectives. Mutual funds allow small investors to participate in the capital market, as these call for low initial investment requirement.
"Mutual funds are an important way for ordinary folks to participate in the equities. For only P5,000, a person can join mutual funds," he said.
MFMCP is precisely targeting the retail market. "We focus on providing returns to our clients. It does not matter whether you have P5,000 or P5,000,000 invested with us, all our clients benefit equally, relative to the amount they invested and fund they invest it, from the returns we provide," Hagedorn said.
It also targetting overseas Filipino workers who are looking for an alternative site for investment aside from the traditional bank savings.
"Over four hundred (from Hong Kong) are now shareholders of Kabuhayan fund. And they continue to add to their investments on a regular basis," MFMCP said.
By Zinnia B. Dela Peña
The Philippine Star 01/26/2006
The Mutual Fund Management Co. of the Philippines Inc.(MFMCP), an investment management company owned by ATR Kim-Eng Capital Partners Inc. and Clemente Fund Management (Asia) Ltd., is optimistic on the prospects of the mutual fund industry for this year given the improvement in the country’s fiscal and economic environment.
MFMCP is responsible for the advisory, distribution and administration of the Kabuhayan (Balanced) Mutual Fund, the ATR Kim-Eng Opportunity Fund and the ATR Kim Eng Fixed Income Fund.
It also oversees the GSIS Kinabukasan Fund, which gave investors a year-to-date return of 14.16 percent.
The ATR Kim Eng Equity Opportunity Fund, on the other hand, was the best performing equity fund in the country in 2005, giving a year-to-date return of 21.34 percent.
This return was 39.8 percent higher than the next best performing equity mutual fund (15.26 percent) and 46.4 percent higher than all Philippine index mutual funds (14.57 percent).
The ATR Kim Eng Fixed Income Fund was also the fifth best performing fixed income mutual fund with year-to-date return to investors of 7.38 percent. The company has successfully grown its business despite being new in the industry.
In 2003, its assets under management totaled around P300 million. It now manages funds totaling over half a billion pesos.
MFMCP president and chief executive officer Phillip Hagedorn said: "Currently, we favor equities. There are some good values in the stock market. The peso has strengthened, the business environment is getting more stable and with the 91-day treasury bill at just above five percent, equities are an attractive opportunity for the first quarter of this year."
Hagedorn said mutual funds contribute to the development of the capital market by pooling money from a large group of investors who have similar objectives. Mutual funds allow small investors to participate in the capital market, as these call for low initial investment requirement.
"Mutual funds are an important way for ordinary folks to participate in the equities. For only P5,000, a person can join mutual funds," he said.
MFMCP is precisely targeting the retail market. "We focus on providing returns to our clients. It does not matter whether you have P5,000 or P5,000,000 invested with us, all our clients benefit equally, relative to the amount they invested and fund they invest it, from the returns we provide," Hagedorn said.
It also targetting overseas Filipino workers who are looking for an alternative site for investment aside from the traditional bank savings.
"Over four hundred (from Hong Kong) are now shareholders of Kabuhayan fund. And they continue to add to their investments on a regular basis," MFMCP said.
Monday, January 23, 2006
Peso may hit P53; T-bill rates to slip
Business World
Vol. XIX, No. 129
Monday, January 23, 2006 MANILA, PHILIPPINES
Banking & Finance
Peso may hit P53; T-bill rates to slip
The peso is likely to test the P53 level this week as dollar demand continues to grow while supply has diminished, dealers said.
"The peso has corrected. The market will try to test P53. It all depends on demand and what news will be coming out," a currency trader from a local bank said.
Last Friday, the local currency closed at P52.96, ending the week lower by 1.1% amid strong corporate demand for the greenback and the continued strengthening of the dollar against regional currencies.
Banks said foreign exchange remittances from overseas Filipino workers, which lifted the peso in 2005 to its highest in more than two years, have slowed down since the end of the Christmas season. They said the peso’s recent weakness could mean that it has ended its appreciation against the dollar, at least for now.
"The peso failed to break [past] P52.25 and didn’t reach P52. It has started to correct which is also good since the pace at which it rose last year was too fast," one trader said.
"Chartwise, the week’s close at P52.96 implies that a reversal is at play and a near-term bottom is in place at the P52.25 levels. Expect further tests towards the P53.25 to P53.50 levels in the coming weeks," said Jonathan L. Ravelas, Banco de Oro Universal Bank’s market strategist.
But a trader from a foreign bank said the P53 barrier could prove to be difficult to break.
"There will be strong resistance for it to break P53. This may be viewed as a big opportunity for offshore players to come in. Foreigners are watching out for re-entry levels especially those who were left out before," he said, referring to the peso’s quick rise starting October from the past-P56 levels to nearly P52.
T-BILL RATES TO DROP ANEW
Meanwhile, premium risk rates of Treasury bills are likely to move down in today’s auction amid expectations that the government’s budget deficit for last year will be lower than expected. But traders said the effect on rates will be minimal since such expectations have already been factored in.
"Rates have gone down significantly. It should stabilize, correct a little. But the Treasury may be unwilling to let rates rise and since the supply is few, banks will have to compete," a bond dealer from a foreign bank said.
At the auction last week, the rate of the three-month paper -- which banks use in pricing loans -- fell by 9.8 basis points (bps) to 4.863%. The last time the paper fetched nearly the same price was on April 15, 2002 when it was sold for 4.347%. It reached its lowest level since 1987 on April 30, 2002 when it was sold for 4.299%.
The rate of the six-month paper also decreased 12.1 bps to 6.314% while the rate of the one-year paper dropped 11 bps to 7.289%.
Since the start of the year, the rates of the six-month and one-year papers have fallen by almost a percentage point. They traded from 7.206% and 7.969%, respectively. -- Karl Lester M. Yap
Vol. XIX, No. 129
Monday, January 23, 2006 MANILA, PHILIPPINES
Banking & Finance
Peso may hit P53; T-bill rates to slip
The peso is likely to test the P53 level this week as dollar demand continues to grow while supply has diminished, dealers said.
"The peso has corrected. The market will try to test P53. It all depends on demand and what news will be coming out," a currency trader from a local bank said.
Last Friday, the local currency closed at P52.96, ending the week lower by 1.1% amid strong corporate demand for the greenback and the continued strengthening of the dollar against regional currencies.
Banks said foreign exchange remittances from overseas Filipino workers, which lifted the peso in 2005 to its highest in more than two years, have slowed down since the end of the Christmas season. They said the peso’s recent weakness could mean that it has ended its appreciation against the dollar, at least for now.
"The peso failed to break [past] P52.25 and didn’t reach P52. It has started to correct which is also good since the pace at which it rose last year was too fast," one trader said.
"Chartwise, the week’s close at P52.96 implies that a reversal is at play and a near-term bottom is in place at the P52.25 levels. Expect further tests towards the P53.25 to P53.50 levels in the coming weeks," said Jonathan L. Ravelas, Banco de Oro Universal Bank’s market strategist.
But a trader from a foreign bank said the P53 barrier could prove to be difficult to break.
"There will be strong resistance for it to break P53. This may be viewed as a big opportunity for offshore players to come in. Foreigners are watching out for re-entry levels especially those who were left out before," he said, referring to the peso’s quick rise starting October from the past-P56 levels to nearly P52.
T-BILL RATES TO DROP ANEW
Meanwhile, premium risk rates of Treasury bills are likely to move down in today’s auction amid expectations that the government’s budget deficit for last year will be lower than expected. But traders said the effect on rates will be minimal since such expectations have already been factored in.
"Rates have gone down significantly. It should stabilize, correct a little. But the Treasury may be unwilling to let rates rise and since the supply is few, banks will have to compete," a bond dealer from a foreign bank said.
At the auction last week, the rate of the three-month paper -- which banks use in pricing loans -- fell by 9.8 basis points (bps) to 4.863%. The last time the paper fetched nearly the same price was on April 15, 2002 when it was sold for 4.347%. It reached its lowest level since 1987 on April 30, 2002 when it was sold for 4.299%.
The rate of the six-month paper also decreased 12.1 bps to 6.314% while the rate of the one-year paper dropped 11 bps to 7.289%.
Since the start of the year, the rates of the six-month and one-year papers have fallen by almost a percentage point. They traded from 7.206% and 7.969%, respectively. -- Karl Lester M. Yap
Gov't expects billions in savings
this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=23&file=12
Gov't expects billions in savings
Posted: 3:04 AM Jan. 23, 2006
Michelle V. Remo
Inquirer
(Published on Page B14 of the January 23, 2006 issue of the Philippine Daily Inquirer)
THE GOVERNMENT EXPECTS TO GENERATE billions of pesos in savings from debt servicing this year, as the peso strengthens against the US dollar, while interest rates are seen to decline further.
In a sensitivity analysis, the Department of Finance said the national government could save P4.369 billion this year for every unit of peso appreciation, and another P5.137 billion for every percentage-point decline in interest rates.
Under the government's 2006 fiscal program, it is set to pay P381.7 billion worth of maturing foreign and domestic debts.
The 2006 fiscal program assumed that the average exchange rate would settle at P56:$1, and that the benchmark 91-day Treasury bill rate would hit 8 percent.
Strong inflow of remittances from abroad--money mostly sent by overseas Filipino workers to relatives in the country--has propped up the peso against the dollar.
The peso is hovering at the P52:$1 level since the beginning of the year, On Friday, it closed at P52.96:$1. The Bangko Sentral ng Pilipinas said that there is even a possibility that the peso would hit the 51 to the dollar level.
T-bill rates have also been sliding due to the high level of market liquidity, which increases demand for government securities, and the reduction in the supply of T-bills and bonds because of the government's dwindling budget deficit.
The Bureau of the Treasury earlier announced that the government's domestic borrowing program for the first quarter of this year was set at P75 billion, or 47 percent lower than the P142 billion borrowed during the same period of last year.
T-bill rates dropped across all maturities last week, with the 91-day tenor breaching the 5-percent mark and falling to 4.863 percent, the lowest since August 2002.
The government had set a budget deficit ceiling of P180 billion last year, but the Treasury said the actual deficit figure could be lower than P160 billion.
The Department of Finance, head agency of the Treasury, will announce the official 2005 budget deficit figure today.
copyright ©2006 INQ7money.net all rights reserved
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=23&file=12
Gov't expects billions in savings
Posted: 3:04 AM Jan. 23, 2006
Michelle V. Remo
Inquirer
(Published on Page B14 of the January 23, 2006 issue of the Philippine Daily Inquirer)
THE GOVERNMENT EXPECTS TO GENERATE billions of pesos in savings from debt servicing this year, as the peso strengthens against the US dollar, while interest rates are seen to decline further.
In a sensitivity analysis, the Department of Finance said the national government could save P4.369 billion this year for every unit of peso appreciation, and another P5.137 billion for every percentage-point decline in interest rates.
Under the government's 2006 fiscal program, it is set to pay P381.7 billion worth of maturing foreign and domestic debts.
The 2006 fiscal program assumed that the average exchange rate would settle at P56:$1, and that the benchmark 91-day Treasury bill rate would hit 8 percent.
Strong inflow of remittances from abroad--money mostly sent by overseas Filipino workers to relatives in the country--has propped up the peso against the dollar.
The peso is hovering at the P52:$1 level since the beginning of the year, On Friday, it closed at P52.96:$1. The Bangko Sentral ng Pilipinas said that there is even a possibility that the peso would hit the 51 to the dollar level.
T-bill rates have also been sliding due to the high level of market liquidity, which increases demand for government securities, and the reduction in the supply of T-bills and bonds because of the government's dwindling budget deficit.
The Bureau of the Treasury earlier announced that the government's domestic borrowing program for the first quarter of this year was set at P75 billion, or 47 percent lower than the P142 billion borrowed during the same period of last year.
T-bill rates dropped across all maturities last week, with the 91-day tenor breaching the 5-percent mark and falling to 4.863 percent, the lowest since August 2002.
The government had set a budget deficit ceiling of P180 billion last year, but the Treasury said the actual deficit figure could be lower than P160 billion.
The Department of Finance, head agency of the Treasury, will announce the official 2005 budget deficit figure today.
copyright ©2006 INQ7money.net all rights reserved
Gov't pump-priming plan gets boost
this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=23&file=1
30% OF VAT PROCEEDS TO GO TO INFRA PROJECTS
Gov't pump-priming plan gets boost
Posted: 2:48 AM Jan. 23, 2006
Michelle V. Remo
Inquirer
(Published on Page B1 of the January 23, 2006 issue of the Philippine Daily Inquirer)
THE DEPARTMENT OF FINANCE SAID THE government's better-than-expected fiscal position last year would allow it to undertake a major economic pump-priming program for 2006 without sacrificing its deficit-reduction goal.
President Macapagal-Arroyo earlier directed the Department of Budget and Management to allot P35 billion this year for pump-priming activities largely related to infrastructure development.
The plan to boost spending on infrastructure raised doubts on the government's commitment to continue reducing its budget deficit until it reaches zero by 2008.
But in a discussion paper on budget-related issues, the DOF said the government would not abandon the target of slashing the deficit to only P125 billion this year. It said the pump-priming could very well be absorbed by the government's improving fiscal condition.
Higher-than-programmed revenue collections last year coupled with belt-tightening measures allowed the government to register a budget deficit of less than P160 billion, or much better than the official deficit ceiling of P180 billion set for 2005.
Official budget deficit data for 2005 will be released today.
Malacañang earlier said the P35 billion to be used for economic pump-priming this year would be taken from the savings arising from the lower-than-programmed deficit last year. The "savings" referred to by the Palace was not in the form of actual cash but only an elbow room for additional expenditures because the deficit was lower than programmed.
The DOF noted that of the P81.4 billion in additional revenues to be generated this year from the newly implemented VAT Reform Law, 30 percent has already been officially programmed for pump-priming activities.
This means that the P125-billion target deficit for 2006 already factored in the planned additional spending for infrastructure and other basic services.
"The pump-priming will involve increasing expenditures in the first semester to take advantage of the dry season and realize the impact on growth within the year," the DOF said.
Now that the budget deficit is narrowing, the government is focusing on improving the country's infrastructure, whose poor state has been largely blamed for discouraging the entry of foreign investments.
copyright ©2006 INQ7money.net all rights reserved
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=23&file=1
30% OF VAT PROCEEDS TO GO TO INFRA PROJECTS
Gov't pump-priming plan gets boost
Posted: 2:48 AM Jan. 23, 2006
Michelle V. Remo
Inquirer
(Published on Page B1 of the January 23, 2006 issue of the Philippine Daily Inquirer)
THE DEPARTMENT OF FINANCE SAID THE government's better-than-expected fiscal position last year would allow it to undertake a major economic pump-priming program for 2006 without sacrificing its deficit-reduction goal.
President Macapagal-Arroyo earlier directed the Department of Budget and Management to allot P35 billion this year for pump-priming activities largely related to infrastructure development.
The plan to boost spending on infrastructure raised doubts on the government's commitment to continue reducing its budget deficit until it reaches zero by 2008.
But in a discussion paper on budget-related issues, the DOF said the government would not abandon the target of slashing the deficit to only P125 billion this year. It said the pump-priming could very well be absorbed by the government's improving fiscal condition.
Higher-than-programmed revenue collections last year coupled with belt-tightening measures allowed the government to register a budget deficit of less than P160 billion, or much better than the official deficit ceiling of P180 billion set for 2005.
Official budget deficit data for 2005 will be released today.
Malacañang earlier said the P35 billion to be used for economic pump-priming this year would be taken from the savings arising from the lower-than-programmed deficit last year. The "savings" referred to by the Palace was not in the form of actual cash but only an elbow room for additional expenditures because the deficit was lower than programmed.
The DOF noted that of the P81.4 billion in additional revenues to be generated this year from the newly implemented VAT Reform Law, 30 percent has already been officially programmed for pump-priming activities.
This means that the P125-billion target deficit for 2006 already factored in the planned additional spending for infrastructure and other basic services.
"The pump-priming will involve increasing expenditures in the first semester to take advantage of the dry season and realize the impact on growth within the year," the DOF said.
Now that the budget deficit is narrowing, the government is focusing on improving the country's infrastructure, whose poor state has been largely blamed for discouraging the entry of foreign investments.
copyright ©2006 INQ7money.net all rights reserved
Friday, January 20, 2006
Bond swap boosts hope for market
Business Mirror
January 20, 2006
http://www.businessmirror.com.ph/2006/0120/20%20frontpage%20bond.php
Bond swap boosts hope for market
By Jun Vallecera
Reporter
HOPES are high the domestic bond market would finally get the investor attention it deserves with the upcoming swap of outstanding peso bonds for new ones starting next month.
Simon Paterno, whose employer, the financial services giant Credit Suisse First Boston, has been appointed financial arranger of the transaction, said the bond swap is seen to enliven the local debt market that in the past was often ignored in favor of more lucrative markets in the region.
"We were generally bypassed owing to the very wide bid and offer spreads on our peso bonds," Paterno said.
The term refers to the price at which a prospective buyer is willing to pay for a given security, which are
three- to seven-year government bonds in this case.
They are used by so-called market makers who stand by, ready to buy or sell round lots of IOUs at publicly
quoted prices.
Because of the relative immaturity of Manila 's debt market, bid and offer rates on peso bonds are generally wide, discouraging any meaningful investor participation, Paterno explained.
That immaturity is costing the Philippine economy lots of lost opportunities in terms of accessing long-term money necessary for key infrastructure like deep water ports, first-class airports, high-speed roadways and the like.
But with the bond swap, National Treasurer Omar Cruz said the myriad of sovereign bonds out there would be reduced to just three.
While the solidified bond market does not translate to lower interest cost to government overall, the simplified state is seen to create "efficiency in the market that will bring about lower costs over time," Cruz asserted.
"The simplified state will make us very liquid," the former Citibank executive added.
It was also hoped the simplified market will encourage the reluctant bond investor to invest in longer-dated government securities.
And because the debt market will henceforth be more transparent, those who turn around and sell "will no longer be creamed by the lack of bond buyers."
"Investors will no longer have to deal with the same broker and get creamed all the time because the market will always be there," Cruz said. Bond market players were initially ecstatic about the bond swap, which will be conducted through the auction of eligible IOUs on February 10 and again on the 24th of the same month.
"Bond investors can sell at better spreads and with greater ease with the facility," Cruz said.
January 20, 2006
http://www.businessmirror.com.ph/2006/0120/20%20frontpage%20bond.php
Bond swap boosts hope for market
By Jun Vallecera
Reporter
HOPES are high the domestic bond market would finally get the investor attention it deserves with the upcoming swap of outstanding peso bonds for new ones starting next month.
Simon Paterno, whose employer, the financial services giant Credit Suisse First Boston, has been appointed financial arranger of the transaction, said the bond swap is seen to enliven the local debt market that in the past was often ignored in favor of more lucrative markets in the region.
"We were generally bypassed owing to the very wide bid and offer spreads on our peso bonds," Paterno said.
The term refers to the price at which a prospective buyer is willing to pay for a given security, which are
three- to seven-year government bonds in this case.
They are used by so-called market makers who stand by, ready to buy or sell round lots of IOUs at publicly
quoted prices.
Because of the relative immaturity of Manila 's debt market, bid and offer rates on peso bonds are generally wide, discouraging any meaningful investor participation, Paterno explained.
That immaturity is costing the Philippine economy lots of lost opportunities in terms of accessing long-term money necessary for key infrastructure like deep water ports, first-class airports, high-speed roadways and the like.
But with the bond swap, National Treasurer Omar Cruz said the myriad of sovereign bonds out there would be reduced to just three.
While the solidified bond market does not translate to lower interest cost to government overall, the simplified state is seen to create "efficiency in the market that will bring about lower costs over time," Cruz asserted.
"The simplified state will make us very liquid," the former Citibank executive added.
It was also hoped the simplified market will encourage the reluctant bond investor to invest in longer-dated government securities.
And because the debt market will henceforth be more transparent, those who turn around and sell "will no longer be creamed by the lack of bond buyers."
"Investors will no longer have to deal with the same broker and get creamed all the time because the market will always be there," Cruz said. Bond market players were initially ecstatic about the bond swap, which will be conducted through the auction of eligible IOUs on February 10 and again on the 24th of the same month.
"Bond investors can sell at better spreads and with greater ease with the facility," Cruz said.
Sunday, January 15, 2006
Retirement savings plan perks to cost P10B yearly
Business World
Vol. XIX, No. 123
Friday, January 13, 2006 MANILA, PHILIPPINES
Today’s Headlines
Retirement savings plan perks to cost P10B yearly
Legislative proposals for tax-free individual retirement schemes similar to the US 401(k) plans could result in lost tax revenues of as much as P10 billion annually, latest Finance department estimates show.
Allowing contributions to the proposed Personal Equity and Retirement Accounts (PERA) to be tax-deductible will cost the government P1.22 billion annually. The bulk of forgone revenues, however, is expected to come from a provision exempting interest income earned by PERA accounts from the 20% final withholding tax.
If PERA investment income is tax-exempt, lost revenues could be anywhere from P1.16 billion to as high as P8.82 billion yearly, the estimates showed.
Senate Bill 1343 filed by Senator Ralph G. Recto allows all contributions made within certain limits to be 100% deductible from the taxable income of the contributor. All earnings of the PERA accounts are also tax-exempt until withdrawn. All distributions, withdrawals or early withdrawals will be taxed as income to the contributor in the tax year in which the funds are received.
A similar bill filed by Senator Edgardo J. Angara, meanwhile, grants a 5% tax credit on PERA contributions.
Approval of the PERA proposal is expected to be one of the Senate’s priorities when it resumes session next week.
The Finance department wants further studies on the PERA "so that it will be a truly regulated privately funded retirement scheme."
"The PERA proposal should also be evaluated in conjunction with the reform of the pension system, and other capital and financial market reforms," it said.
The proposed retirement plan, though, "has the potential to mobilize savings that can positively contribute to capital formation and investments."
Finance officials have warned that the existing proposals may not result in increased savings as bank accounts would merely be converted into PERAs to avail of tax breaks. The bill also does not fit with the department’s objective of rationalizing all incentives to widen the tax base.
The Senate Committee on Banks, Financial Institutions, and Currencies has formed a technical working group to draft a substitute bill to the ones filed by Senators Recto and Angara, as well as those filed by Senators Manuel A. Roxas II and Sergio R. Osmeña III.
PERAs can be administered by a bank or trust company accredited by the Bangko Sentral ng Pilipinas, investment companies, investment houses accredited by the Securities and Exchange Commission, and life insurance and pre-need companies accredited by the Insurance Commission.
Under Mr. Recto’s proposal, an individual can contribute up to 15% of total annual compensation every year, but not exceeding 15% of the annualized average monthly salary credit computed by the Social Security System (SSS). Self-employed individuals, meanwhile, can contribute up to 23% of the SSS annualized average monthly salary credit. Distributions will be made upon retirement.
Individuals participating in an employer-sponsored retirement plan may withdraw their PERA assets either in a lump sum or in installments. For self-employed persons, at least 50% of the assets must be withdrawn in the form of an annuity with a minimum term of five years.
PERA contributions may be put in listed stocks; corporate or government bonds or commercial papers; investments in foreign currencies including the currencies themselves; asset-backed securities, trust funds, and mutual funds; and cash and bank deposits. -- Felipe F. Salvosa II
Vol. XIX, No. 123
Friday, January 13, 2006 MANILA, PHILIPPINES
Today’s Headlines
Retirement savings plan perks to cost P10B yearly
Legislative proposals for tax-free individual retirement schemes similar to the US 401(k) plans could result in lost tax revenues of as much as P10 billion annually, latest Finance department estimates show.
Allowing contributions to the proposed Personal Equity and Retirement Accounts (PERA) to be tax-deductible will cost the government P1.22 billion annually. The bulk of forgone revenues, however, is expected to come from a provision exempting interest income earned by PERA accounts from the 20% final withholding tax.
If PERA investment income is tax-exempt, lost revenues could be anywhere from P1.16 billion to as high as P8.82 billion yearly, the estimates showed.
Senate Bill 1343 filed by Senator Ralph G. Recto allows all contributions made within certain limits to be 100% deductible from the taxable income of the contributor. All earnings of the PERA accounts are also tax-exempt until withdrawn. All distributions, withdrawals or early withdrawals will be taxed as income to the contributor in the tax year in which the funds are received.
A similar bill filed by Senator Edgardo J. Angara, meanwhile, grants a 5% tax credit on PERA contributions.
Approval of the PERA proposal is expected to be one of the Senate’s priorities when it resumes session next week.
The Finance department wants further studies on the PERA "so that it will be a truly regulated privately funded retirement scheme."
"The PERA proposal should also be evaluated in conjunction with the reform of the pension system, and other capital and financial market reforms," it said.
The proposed retirement plan, though, "has the potential to mobilize savings that can positively contribute to capital formation and investments."
Finance officials have warned that the existing proposals may not result in increased savings as bank accounts would merely be converted into PERAs to avail of tax breaks. The bill also does not fit with the department’s objective of rationalizing all incentives to widen the tax base.
The Senate Committee on Banks, Financial Institutions, and Currencies has formed a technical working group to draft a substitute bill to the ones filed by Senators Recto and Angara, as well as those filed by Senators Manuel A. Roxas II and Sergio R. Osmeña III.
PERAs can be administered by a bank or trust company accredited by the Bangko Sentral ng Pilipinas, investment companies, investment houses accredited by the Securities and Exchange Commission, and life insurance and pre-need companies accredited by the Insurance Commission.
Under Mr. Recto’s proposal, an individual can contribute up to 15% of total annual compensation every year, but not exceeding 15% of the annualized average monthly salary credit computed by the Social Security System (SSS). Self-employed individuals, meanwhile, can contribute up to 23% of the SSS annualized average monthly salary credit. Distributions will be made upon retirement.
Individuals participating in an employer-sponsored retirement plan may withdraw their PERA assets either in a lump sum or in installments. For self-employed persons, at least 50% of the assets must be withdrawn in the form of an annuity with a minimum term of five years.
PERA contributions may be put in listed stocks; corporate or government bonds or commercial papers; investments in foreign currencies including the currencies themselves; asset-backed securities, trust funds, and mutual funds; and cash and bank deposits. -- Felipe F. Salvosa II
Saturday, January 14, 2006
Millions to benefit from new Rent Control Law -- Recto
Millions to benefit from new Rent Control Law -- Recto
Jan 14, 2006
Updated 04:36pm (Mla time)
INQ7.net
http://news.inq7.net/express/html_output/20060114-62929.xml.html
AN estimated 15 million tenants are expected to benefit from the new Rent Control Law that is now in effect, said Senator Ralph Recto on Saturday.
In a statement, he said the new law covers a higher rent than the previous law that lapsed in December 2004. He said the newly signed law increased the covered monthly rent from 7,000 pesos to 10,000 pesos for urban areas and from 4,000 pesos to 5,000 pesos for non-urban areas.
This means that tenants renting at these amounts will face a yearly rent increase of a maximum of 10 percent, the principal author of the law at the Senate said.
Recto said the amounts specified in the law balances the needs of both investors in the housing sector and tenants.
"As much as we wanted to give greater relief to tenants, we also did not want to discourage housing builders and landlords who want to improve their properties," he said.
Recto said the new law also specifies that landlords can collect only two months deposit and one month advance rent. He said it also clarifies the grounds for judicial eviction including non-payment of rent for three consecutive months.
"The old laws generated conflicts as when landlords deceptively evicted tenants saying the units will be used by their family but actually would rent it out to others within the year,” he said.
Recto added that the 10,000-peso monthly rent covered by the new law is also exempted from the new Value-Added Tax.
Veronica Uy
©2006 www.inq7.net all rights reserved
Jan 14, 2006
Updated 04:36pm (Mla time)
INQ7.net
http://news.inq7.net/express/html_output/20060114-62929.xml.html
AN estimated 15 million tenants are expected to benefit from the new Rent Control Law that is now in effect, said Senator Ralph Recto on Saturday.
In a statement, he said the new law covers a higher rent than the previous law that lapsed in December 2004. He said the newly signed law increased the covered monthly rent from 7,000 pesos to 10,000 pesos for urban areas and from 4,000 pesos to 5,000 pesos for non-urban areas.
This means that tenants renting at these amounts will face a yearly rent increase of a maximum of 10 percent, the principal author of the law at the Senate said.
Recto said the amounts specified in the law balances the needs of both investors in the housing sector and tenants.
"As much as we wanted to give greater relief to tenants, we also did not want to discourage housing builders and landlords who want to improve their properties," he said.
Recto said the new law also specifies that landlords can collect only two months deposit and one month advance rent. He said it also clarifies the grounds for judicial eviction including non-payment of rent for three consecutive months.
"The old laws generated conflicts as when landlords deceptively evicted tenants saying the units will be used by their family but actually would rent it out to others within the year,” he said.
Recto added that the 10,000-peso monthly rent covered by the new law is also exempted from the new Value-Added Tax.
Veronica Uy
©2006 www.inq7.net all rights reserved
Finance dept wants LGU fund allocation scheme revised
this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=14&file=10
Finance dept wants LGU fund allocation scheme revised
Posted: 3:26 AM Jan. 14, 2006
Michelle V. Remo
Inquirer
THE Department of Finance wants Congress to restructure the Internal Revenue Allotment -- the funds the national government gives local government units (LGUs) -- to prompt LGUs to maximize their own revenue-raising capabilities, according to a paper on the department's legislative proposals for 2006.
The current structure of the IRA "does not encourage LGUs to generate additional revenues to support additional expenditures. Thus, it does not have any fiscal stimulation effect on local finance on all levels of local governments," the paper says.
At present, under the Local Government Code, 40 percent of the national government's internal revenue collections are allocated for LGUs: 23 percent to provincial government, 34 percent to municipal government, 23 percent to city government, and 20 percent to village councils.
The department paper says the IRA should be rationalized so that more allotments would go to LGUs that really lack resources, and make the able ones lessen their financial dependence on the national government.
Adjusting the IRA has been proposed since 2004, when the President Gloria Macapagal-Arroyo called attention to the national government's large budget deficit and heavy debt.
The president of the Philippine Association of Local Treasurers and Assessors, Victor Endriga, treasurer of Quezon City, said rich cities like Quezon City should agree to give up their shares of the IRA in favor of poor LGUs.
Some LGUs have opposed the proposal, saying trimming down the IRA would hurt economic growth at the local level.
Senator Ralph Recto filed a bill protecting the LGUs' share in national government revenues. His bill proposes to amend the Local Government Code and prohibit the president from adjusting the IRA even amid a budget problem on the national government level.
Recto said allowing the president to adjust the IRA posed threat on the sufficient delivery of public services. With INQ7.net
Copyright 2005 Inquirer News Service, INQ7.net. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
copyright ©2006 INQ7money.net all rights reserved
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=14&file=10
Finance dept wants LGU fund allocation scheme revised
Posted: 3:26 AM Jan. 14, 2006
Michelle V. Remo
Inquirer
THE Department of Finance wants Congress to restructure the Internal Revenue Allotment -- the funds the national government gives local government units (LGUs) -- to prompt LGUs to maximize their own revenue-raising capabilities, according to a paper on the department's legislative proposals for 2006.
The current structure of the IRA "does not encourage LGUs to generate additional revenues to support additional expenditures. Thus, it does not have any fiscal stimulation effect on local finance on all levels of local governments," the paper says.
At present, under the Local Government Code, 40 percent of the national government's internal revenue collections are allocated for LGUs: 23 percent to provincial government, 34 percent to municipal government, 23 percent to city government, and 20 percent to village councils.
The department paper says the IRA should be rationalized so that more allotments would go to LGUs that really lack resources, and make the able ones lessen their financial dependence on the national government.
Adjusting the IRA has been proposed since 2004, when the President Gloria Macapagal-Arroyo called attention to the national government's large budget deficit and heavy debt.
The president of the Philippine Association of Local Treasurers and Assessors, Victor Endriga, treasurer of Quezon City, said rich cities like Quezon City should agree to give up their shares of the IRA in favor of poor LGUs.
Some LGUs have opposed the proposal, saying trimming down the IRA would hurt economic growth at the local level.
Senator Ralph Recto filed a bill protecting the LGUs' share in national government revenues. His bill proposes to amend the Local Government Code and prohibit the president from adjusting the IRA even amid a budget problem on the national government level.
Recto said allowing the president to adjust the IRA posed threat on the sufficient delivery of public services. With INQ7.net
Copyright 2005 Inquirer News Service, INQ7.net. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
copyright ©2006 INQ7money.net all rights reserved
Friday, January 13, 2006
Filipino families’ savings decline
Saturday, January 14, 2006
Manila Times
Filipino families’ savings decline
By Cheryl M. Arcibal, Reporter
THE amount Filipino families set aside as savings dipped despite a slight increase in their average income, the National Statistics Office reported Friday.
Comparing the results of its 2000 and 2003 family income and expenditures survey, the NSO said that while Filipino families earned an average of P147,888 in 2003, up by 1.9 percent from P145,121 in 2000, savings contracted by 7.9 percent.
Average annual savings in 2000 was P26,282, higher than the 2003 figure of P24,198.
Total savings in 2003, however, stood at P398.8 billion, up by 0.7 percent from P396.1 billion in 2000.
The total income of the estimated 16.48 million Filipino families in 2003 was recorded at P2.4 trillion, an increase of 11.4 percent from the P2,187 trillion earned by 15.07 million families in 2000.
The failure of household savings to keep up with rising incomes was due to higher expenditures, as families in 2003 spent an average of P123,690 a year, or 4.1 percent higher than spending of P118,839 in 2000.
Total household spending in 2003 reached P2 trillion or 13.8 percent higher than the P1.8 trillion in 2000.
The same NSO report said the Gini ratio, or the index of income concentration in 2003, was lower at 0.4605, down by 4.5 percent from 0.4822 in 2000. A lower Gini coefficient indicates a more equal income distribution among Filipino families.
Manila Times
Filipino families’ savings decline
By Cheryl M. Arcibal, Reporter
THE amount Filipino families set aside as savings dipped despite a slight increase in their average income, the National Statistics Office reported Friday.
Comparing the results of its 2000 and 2003 family income and expenditures survey, the NSO said that while Filipino families earned an average of P147,888 in 2003, up by 1.9 percent from P145,121 in 2000, savings contracted by 7.9 percent.
Average annual savings in 2000 was P26,282, higher than the 2003 figure of P24,198.
Total savings in 2003, however, stood at P398.8 billion, up by 0.7 percent from P396.1 billion in 2000.
The total income of the estimated 16.48 million Filipino families in 2003 was recorded at P2.4 trillion, an increase of 11.4 percent from the P2,187 trillion earned by 15.07 million families in 2000.
The failure of household savings to keep up with rising incomes was due to higher expenditures, as families in 2003 spent an average of P123,690 a year, or 4.1 percent higher than spending of P118,839 in 2000.
Total household spending in 2003 reached P2 trillion or 13.8 percent higher than the P1.8 trillion in 2000.
The same NSO report said the Gini ratio, or the index of income concentration in 2003, was lower at 0.4605, down by 4.5 percent from 0.4822 in 2000. A lower Gini coefficient indicates a more equal income distribution among Filipino families.
Saturday, January 07, 2006
GIR surges 13.5% to $18.4B in ’05
GIR surges 13.5% to $18.4B in ’05
By Des Ferriols
The Philippine Star 01/07/2006
http://www.philstar.com/philstar/NEWS200601070703.htm
The country’s gross international reserves (GIR) rose by 13.5 percent to $18.4 billion in December last year from the level recorded in the same period in 2004, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
The BSP said the end-December level was $1.4 billion more than the government’s target of $17 billion due primarily to massive dollar remittances from overseas Filipino workers (OFWs).
The BSP also said the December GIR was two percent higher than the end-November 2005 level of $18.059 billion.
BSP Governor Amando M. Tetangco Jr. said the end-December GIR was enough to cover about 3.8 months worth of imports of goods and payments of services and income.
This level, Tetangco said, was also equivalent to 2.9 times the country’s short-term debt based on original maturity and 1.6 times based on residual maturity.
Based on BSP data, the country’s GIR surpassed the 2004 level as early as June last yar when the reserves reached $17.337 billion due to the government’s $750-million global bond issue.
Because of strong inflows, the BSP has already upgraded its projected balance of payments (BOP) surplus for this year from $852 million to $2 billion, mainly due to record-high remittances from overseas workers.
Remittances from overseas Filipino workers, according to Tetangco, is expected to reach $11 billion and could possibly go up to as high as $12 billion including the inflows not captured by the banking system.
Early in the year, the BSP was only expecting the GIR to reach at least $16 to $17 billion compared to the original projection of $14 billion to $16 billion.
For this year, the BSP expects the GIR at $18 billion to $20 billion with dollar investments coming into the mining sector.
By Des Ferriols
The Philippine Star 01/07/2006
http://www.philstar.com/philstar/NEWS200601070703.htm
The country’s gross international reserves (GIR) rose by 13.5 percent to $18.4 billion in December last year from the level recorded in the same period in 2004, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
The BSP said the end-December level was $1.4 billion more than the government’s target of $17 billion due primarily to massive dollar remittances from overseas Filipino workers (OFWs).
The BSP also said the December GIR was two percent higher than the end-November 2005 level of $18.059 billion.
BSP Governor Amando M. Tetangco Jr. said the end-December GIR was enough to cover about 3.8 months worth of imports of goods and payments of services and income.
This level, Tetangco said, was also equivalent to 2.9 times the country’s short-term debt based on original maturity and 1.6 times based on residual maturity.
Based on BSP data, the country’s GIR surpassed the 2004 level as early as June last yar when the reserves reached $17.337 billion due to the government’s $750-million global bond issue.
Because of strong inflows, the BSP has already upgraded its projected balance of payments (BOP) surplus for this year from $852 million to $2 billion, mainly due to record-high remittances from overseas workers.
Remittances from overseas Filipino workers, according to Tetangco, is expected to reach $11 billion and could possibly go up to as high as $12 billion including the inflows not captured by the banking system.
Early in the year, the BSP was only expecting the GIR to reach at least $16 to $17 billion compared to the original projection of $14 billion to $16 billion.
For this year, the BSP expects the GIR at $18 billion to $20 billion with dollar investments coming into the mining sector.
Friday, January 06, 2006
BSP mulls tighter rules on trust accounts
BSP mulls tighter rules on trust accounts
Manila Standard Today
http://www.manilastandardtoday.com/?page=business03_jan06_2006
Jan 6, 2006
By Eileen A. Mencias
The Bangko Sentral ng Pilipinas (BSP) plans to tighten up banking rules to prevent banks from passing off some time deposits banks as trust accounts to avoid putting up reserves.
Sources said BSP has noted an increase in trust accounts of banks, specifically living trust accounts, prompting regulators to review current rules.
Trust accounts now fall under three classifications — administratorship, personal trust or others that totaled P209.25 billion in the third quarter of 2005 from P175.99 billion in the same period in 2004.
Administratorship trust accounts amounted to P29.192 billion in the third quarter of 2005 while personal trust accounts stood at P144.79 billion. Other trust accounts amounted to P35.27 billion.
Unlike deposits in which banks are required to put up reserves, living trust accounts are exempt from the reserve requirement currently pegged at 21 percent.
Banks will need to set aside at least P43.94 billion in cash in its vaults or in government securities for a deposit of P209.25 billion. The money set aside for reserves represent opportunity losses for banks as they can earn more if they invest them in securities.
BSP sources said the plan calls for the formulation of guidelines and minimum conditions on living trust accounts to prevent the circumvention of banks.
The conditions include a minimum term of more than 30 days, identification of a beneficiary and the purpose for creating the account.
Sources said living trust accounts are similar to a will in which the person who placed the money gives out specific instructions on who benefits from it and how the money should be used. The principals of real living trust accounts are usually absentee owners who create them to take care of their beneficiaries here.
BSP sources said some living trust accounts reported by banks have a term of only 30 days and function just like any other placement. The beneficiaries of some living trust accounts reported by banks are also the same person who invested the money.
Manila Standard Today
http://www.manilastandardtoday.com/?page=business03_jan06_2006
Jan 6, 2006
By Eileen A. Mencias
The Bangko Sentral ng Pilipinas (BSP) plans to tighten up banking rules to prevent banks from passing off some time deposits banks as trust accounts to avoid putting up reserves.
Sources said BSP has noted an increase in trust accounts of banks, specifically living trust accounts, prompting regulators to review current rules.
Trust accounts now fall under three classifications — administratorship, personal trust or others that totaled P209.25 billion in the third quarter of 2005 from P175.99 billion in the same period in 2004.
Administratorship trust accounts amounted to P29.192 billion in the third quarter of 2005 while personal trust accounts stood at P144.79 billion. Other trust accounts amounted to P35.27 billion.
Unlike deposits in which banks are required to put up reserves, living trust accounts are exempt from the reserve requirement currently pegged at 21 percent.
Banks will need to set aside at least P43.94 billion in cash in its vaults or in government securities for a deposit of P209.25 billion. The money set aside for reserves represent opportunity losses for banks as they can earn more if they invest them in securities.
BSP sources said the plan calls for the formulation of guidelines and minimum conditions on living trust accounts to prevent the circumvention of banks.
The conditions include a minimum term of more than 30 days, identification of a beneficiary and the purpose for creating the account.
Sources said living trust accounts are similar to a will in which the person who placed the money gives out specific instructions on who benefits from it and how the money should be used. The principals of real living trust accounts are usually absentee owners who create them to take care of their beneficiaries here.
BSP sources said some living trust accounts reported by banks have a term of only 30 days and function just like any other placement. The beneficiaries of some living trust accounts reported by banks are also the same person who invested the money.
December inflation rate falls to 6.6%
December inflation rate falls to 6.6%
Manila Standard Today
http://www.manilastandardtoday.com/?page=business02_jan06_2006
Jan 6, 2006
By Roderick T. dela Cruz
Headline inflation, or the rate of adjustment in consumer prices, eased to 6.6 percent in December 2005, the lowest in 16 months, as prices of food, clothing and services posted lower increases during the holidays.
The last time the 2000-based inflation rate hit 6.6 percent was in July 2004, before it accelerated to 6.8 percent in August and peaked at 8.6 percent in December of the same year. It stabilized at 7 to 7.1 percent in July to November 2005.
Month-on-month, inflation slowed to 0.3 percent in December from 0.8 percent in November, mainly because of lower increases in prices of services.
According to the National Statistics Office, the headline inflation rate averaged 7.6 percent year-on-year in 2005, higher than 6 percent registered in 2004 and the government’s original target range of 5 to 6 percent for 2005.
Encouraged by the recent easing of energy prices and the strengthening of the peso, the Development Budget and Coordination Committee (DBCC), an inter-agency economic planning body, set an inflation target of 4 to 5 percent for 2006 and 2007.
In December 2005, core inflation, which excludes volatile factors in food and energy prices, further decelerated to 5.8 percent from 6.1 percent in November. Core inflation averaged 7 percent in 12 months of 2005.
By area, headline inflation in Metro Manila eased to 7.4 percent in December from 8 percent in November while inflation in areas outside the metropolis slowed to 6.4 percent from 6.8 percent.
By commodity group, inflation for food, beverage and tobacco, moderated to 5.6 percent in December from 6.3 percent in November while the rate of price increase for clothing slowed to 3.1 percent from 3.2 percent.
Inflation for services also decelerated to 10.1 percent from 10.9 percent while prices of miscellaneous items registered a lower rate of increase at 3 percent in December, compared with the previous month’s 3.1 percent.
On the other hand, year-on-year inflation rates for housing and repair and fuel, light and water items were correspondingly higher at 4.2 percent and 14.8 percent from their respective previous month’s rates of 4.1 percent and 14.4 percent, respectively.
Despite the easing of inflationary pressures, the DBCC acknowledged that risks to inflation still remain, with the continued tightness in global oil reserves.
Both the Asian Development Bank and the United Nations Economic and Social Commission for Asia and the Pacific predicted that inflation would hit 7 percent in the Philippines in 2006, because global oil stocks are expected to remain tight.
Economists said among the internal risks to inflation this year are the planned 2-percentage point increase in the expanded value added tax rate, the possibility of second-round effects on wage-setting and the presence of ample liquidity in the financial system.
Manila Standard Today
http://www.manilastandardtoday.com/?page=business02_jan06_2006
Jan 6, 2006
By Roderick T. dela Cruz
Headline inflation, or the rate of adjustment in consumer prices, eased to 6.6 percent in December 2005, the lowest in 16 months, as prices of food, clothing and services posted lower increases during the holidays.
The last time the 2000-based inflation rate hit 6.6 percent was in July 2004, before it accelerated to 6.8 percent in August and peaked at 8.6 percent in December of the same year. It stabilized at 7 to 7.1 percent in July to November 2005.
Month-on-month, inflation slowed to 0.3 percent in December from 0.8 percent in November, mainly because of lower increases in prices of services.
According to the National Statistics Office, the headline inflation rate averaged 7.6 percent year-on-year in 2005, higher than 6 percent registered in 2004 and the government’s original target range of 5 to 6 percent for 2005.
Encouraged by the recent easing of energy prices and the strengthening of the peso, the Development Budget and Coordination Committee (DBCC), an inter-agency economic planning body, set an inflation target of 4 to 5 percent for 2006 and 2007.
In December 2005, core inflation, which excludes volatile factors in food and energy prices, further decelerated to 5.8 percent from 6.1 percent in November. Core inflation averaged 7 percent in 12 months of 2005.
By area, headline inflation in Metro Manila eased to 7.4 percent in December from 8 percent in November while inflation in areas outside the metropolis slowed to 6.4 percent from 6.8 percent.
By commodity group, inflation for food, beverage and tobacco, moderated to 5.6 percent in December from 6.3 percent in November while the rate of price increase for clothing slowed to 3.1 percent from 3.2 percent.
Inflation for services also decelerated to 10.1 percent from 10.9 percent while prices of miscellaneous items registered a lower rate of increase at 3 percent in December, compared with the previous month’s 3.1 percent.
On the other hand, year-on-year inflation rates for housing and repair and fuel, light and water items were correspondingly higher at 4.2 percent and 14.8 percent from their respective previous month’s rates of 4.1 percent and 14.4 percent, respectively.
Despite the easing of inflationary pressures, the DBCC acknowledged that risks to inflation still remain, with the continued tightness in global oil reserves.
Both the Asian Development Bank and the United Nations Economic and Social Commission for Asia and the Pacific predicted that inflation would hit 7 percent in the Philippines in 2006, because global oil stocks are expected to remain tight.
Economists said among the internal risks to inflation this year are the planned 2-percentage point increase in the expanded value added tax rate, the possibility of second-round effects on wage-setting and the presence of ample liquidity in the financial system.
RP bonds raise $2.2b
RP bonds raise $2.2b
Manila Standard Today
Jan 6, 2006
http://www.manilastandardtoday.com/?page=business01_jan06_2006
By Lawrence Agcaoili
The Philippines successfully sold $2.2 billion worth of sovereign bonds Wednesday evening raising about 70 percent of its full-year foreign borrowing requirement during its first foray into the international bond market this year.
Finance Secretary Margarito Teves told reporters yesterday that the national government has already financed a significant portion of its expected $3.1 billion commercial external funding requirements for the year.
Teves said the Philippines returned to the international capital markets with simultaneous bond offering consisting of $1.5 billion worth of 25-year US dollar denominated bonds and 500 million Euros ($700 million) worth of 10-year bonds.
The Philippines may wait as much as nine months before tapping international markets again as it wants to get a stronger endorsement from credit rating agencies. The government plans to raise a total of $3.1 billion in overseas debt markets this year.
“We are very happy with the response of the investors to this international offering. This is a strong manifestation of the growing international investor confidence that is solidifying on the back of sound macroeconomic and fiscal management by the administration,” Teves said.
The Philippines sold the other day the 25-year dollar bonds to yield 7.875 percent and the 10-year euro bonds to yield 6.375 percent. The order book for the two issues topped $15 billion.
Teves said the international bond market is responding favorably to what has happened and what is happening in the Philippines in recent months.
Due to prudent spending, the national government likely ended 2005 with a budget deficit ranging from P160 billion to P165 billion. Last year, the government was hoping to trim the budget shortfall to P180 billion or 3.4 percent of gross domestic product (GDP) from P187 billion or 3.9 percent of GDP in 2004.
The peso has also appreciated strongly reaching its strongest level in 32 months while the yield of the benchmark 91-day treasury bills (T-bills) fell to its lowest level in 41 months.
He said the national government was hoping that international credit rating agencies led by Standard & Poor’s, Moody’s Investor Service and Fitch International would take note of the country’s fiscal discipline.
“We will continue to work on those macroeconomic fundamentals and what is necessary to continue increasing the level of confidence of our people and the investors in the Philippines. We are hoping of course that as we try to do this there will also be a formal improvement in the way the rating agencies will judge us,” he added.
The three major ratings agencies gave negative outlooks to the Philippines last year on concerns about the pace of fiscal reforms as President Gloria Macapagal Arroyo faced a political crisis over allegations of election cheating and corruption.
Moody’s Investors Service rates Philippine debt at four notches below investment grade, with Standard & Poor’s at three notches below and Fitch Ratings at two notches below.
Moody’s is expected to announce the results of its latest assessment of Philippine ratings in the first quarter. Review teams from Fitch and S&P are expected to arrive in the country in January and April, respectively.
Approximately 400 investors from Asia, Europe, and the United States gobbled up the dollar denominated tranche due January 2031 within 14 hours from the time that it was launched. It carried a coupon of 7.75 percent and was priced at 98.641 percent to yield 7.875 percent or an equivalent of 333.5 basis points over comparable US treasuries.
Manila Standard Today
Jan 6, 2006
http://www.manilastandardtoday.com/?page=business01_jan06_2006
By Lawrence Agcaoili
The Philippines successfully sold $2.2 billion worth of sovereign bonds Wednesday evening raising about 70 percent of its full-year foreign borrowing requirement during its first foray into the international bond market this year.
Finance Secretary Margarito Teves told reporters yesterday that the national government has already financed a significant portion of its expected $3.1 billion commercial external funding requirements for the year.
Teves said the Philippines returned to the international capital markets with simultaneous bond offering consisting of $1.5 billion worth of 25-year US dollar denominated bonds and 500 million Euros ($700 million) worth of 10-year bonds.
The Philippines may wait as much as nine months before tapping international markets again as it wants to get a stronger endorsement from credit rating agencies. The government plans to raise a total of $3.1 billion in overseas debt markets this year.
“We are very happy with the response of the investors to this international offering. This is a strong manifestation of the growing international investor confidence that is solidifying on the back of sound macroeconomic and fiscal management by the administration,” Teves said.
The Philippines sold the other day the 25-year dollar bonds to yield 7.875 percent and the 10-year euro bonds to yield 6.375 percent. The order book for the two issues topped $15 billion.
Teves said the international bond market is responding favorably to what has happened and what is happening in the Philippines in recent months.
Due to prudent spending, the national government likely ended 2005 with a budget deficit ranging from P160 billion to P165 billion. Last year, the government was hoping to trim the budget shortfall to P180 billion or 3.4 percent of gross domestic product (GDP) from P187 billion or 3.9 percent of GDP in 2004.
The peso has also appreciated strongly reaching its strongest level in 32 months while the yield of the benchmark 91-day treasury bills (T-bills) fell to its lowest level in 41 months.
He said the national government was hoping that international credit rating agencies led by Standard & Poor’s, Moody’s Investor Service and Fitch International would take note of the country’s fiscal discipline.
“We will continue to work on those macroeconomic fundamentals and what is necessary to continue increasing the level of confidence of our people and the investors in the Philippines. We are hoping of course that as we try to do this there will also be a formal improvement in the way the rating agencies will judge us,” he added.
The three major ratings agencies gave negative outlooks to the Philippines last year on concerns about the pace of fiscal reforms as President Gloria Macapagal Arroyo faced a political crisis over allegations of election cheating and corruption.
Moody’s Investors Service rates Philippine debt at four notches below investment grade, with Standard & Poor’s at three notches below and Fitch Ratings at two notches below.
Moody’s is expected to announce the results of its latest assessment of Philippine ratings in the first quarter. Review teams from Fitch and S&P are expected to arrive in the country in January and April, respectively.
Approximately 400 investors from Asia, Europe, and the United States gobbled up the dollar denominated tranche due January 2031 within 14 hours from the time that it was launched. It carried a coupon of 7.75 percent and was priced at 98.641 percent to yield 7.875 percent or an equivalent of 333.5 basis points over comparable US treasuries.
Thursday, January 05, 2006
Government urged to bring benefits of market gains to small folk
Government urged to bring benefits of market gains to small folk
By Christina M. Mendez
The Philippine Star 01/05/2006
http://www.philstar.com/philstar/NEWS200601050714.htm
A pro-administration senator urged the government yesterday to translate the country’s positive gains in the financial markets into tangible benefits by implementing programs that will uplift the living conditions of the people.
Sen. Manuel Roxas III, chairman of the committee on trade and industry, said Filipinos should feel the gains from the appreciation of the peso against the dollar.
To be able to achieve this, manufacturers – particularly those who import raw materials – should roll back their prices.
"Manufacturers often cite the increasing costs in importing raw materials brought about by the weakening Philippine peso as the reason to justify price increase of basic goods, but they have yet to roll back their prices," he said.
Roxas also cited that the continued drop in interest rates which should be a major reason in reducing the high interests paid by ordinary consumers in their car and appliance loans, and credit cards.
The 91-day benchmark Treasury bill fetched a rate of 4.961 percent or almost 300 basis points lower than 7.870 percent in January 2005. Banks and financial institutions price their loans based on 91-day T-bill rates.
Roxas, who was a former trade secretary, said the strong growth in the financial economy is not matched by the growth in the real economy. "Even if people have more money as indicated in the increasing OFW remittances, he said Filipinos are neither spending it nor investing their savings," Roxas said.
Meanwhile, Sen. Manuel Villar said the government should take advantage of the continued strong demand for OFWs worldwide.
"We are doing the country as well as the OFWs and their families a huge favor by channeling their hard-earned money into profitable ventures," Villar said.
According to Villar, the remittances of overseas Filipino workers (OFWs), as in previous years, will continue to be the saving grace of the Philippine economy this year.
"It is no secret that the $12 billion or so OFW remittances were the main driver of the country’s economy in 2005. This year, OFWs would still play an indispensable role in our economic performance. We really have a lot to thank the OFWs for," said Villar, chairman of the Senate committee on finance.
The Bangko Sentral forecasts that bank remittances from OFWs are likely to reach $10.3 billion by the end 2005, or 20 percent higher than 2004’s level. This excludes transactions coursed outside the banks, thus total remittances are expected to reach $12 billion.
By Christina M. Mendez
The Philippine Star 01/05/2006
http://www.philstar.com/philstar/NEWS200601050714.htm
A pro-administration senator urged the government yesterday to translate the country’s positive gains in the financial markets into tangible benefits by implementing programs that will uplift the living conditions of the people.
Sen. Manuel Roxas III, chairman of the committee on trade and industry, said Filipinos should feel the gains from the appreciation of the peso against the dollar.
To be able to achieve this, manufacturers – particularly those who import raw materials – should roll back their prices.
"Manufacturers often cite the increasing costs in importing raw materials brought about by the weakening Philippine peso as the reason to justify price increase of basic goods, but they have yet to roll back their prices," he said.
Roxas also cited that the continued drop in interest rates which should be a major reason in reducing the high interests paid by ordinary consumers in their car and appliance loans, and credit cards.
The 91-day benchmark Treasury bill fetched a rate of 4.961 percent or almost 300 basis points lower than 7.870 percent in January 2005. Banks and financial institutions price their loans based on 91-day T-bill rates.
Roxas, who was a former trade secretary, said the strong growth in the financial economy is not matched by the growth in the real economy. "Even if people have more money as indicated in the increasing OFW remittances, he said Filipinos are neither spending it nor investing their savings," Roxas said.
Meanwhile, Sen. Manuel Villar said the government should take advantage of the continued strong demand for OFWs worldwide.
"We are doing the country as well as the OFWs and their families a huge favor by channeling their hard-earned money into profitable ventures," Villar said.
According to Villar, the remittances of overseas Filipino workers (OFWs), as in previous years, will continue to be the saving grace of the Philippine economy this year.
"It is no secret that the $12 billion or so OFW remittances were the main driver of the country’s economy in 2005. This year, OFWs would still play an indispensable role in our economic performance. We really have a lot to thank the OFWs for," said Villar, chairman of the Senate committee on finance.
The Bangko Sentral forecasts that bank remittances from OFWs are likely to reach $10.3 billion by the end 2005, or 20 percent higher than 2004’s level. This excludes transactions coursed outside the banks, thus total remittances are expected to reach $12 billion.
Wednesday, January 04, 2006
Rate for 7-yr T-bonds drops to 9%
this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=04&file=2
Rate for 7-yr T-bonds drops to 9%
Posted: 0:56 AM Jan. 04, 2006
Inquirer
MARKET concerns on the government's long-term financial prospects have dissipated, judging by banks' response to seven-year Treasury bonds auctioned Tuesday, the Bureau of Treasury said.
The bond rate fell below the 10-percent mark at the auction, shedding 1.5 percentage points to 9.0 percent.
The seven-year T-bonds had fetched 10.5 percent when they were last auctioned on Nov. 15. National Treasurer Omar Cruz said his bureau had expected the interest rate to fall to 9.25 percent
"The market has now taken a long-term view on the fiscal position of the government by making very aggressive bids for the seven-year bonds," Cruz said in a press briefing after the auction.
Market players swamped the auction, submitting P12.08 billion worth of bids, more than thrice the P4 billion worth of bonds on offer.
Cruz said the drop in the bond rate could be expected to influence market response to other Treasury debt papers in coming auctions.
"Government efforts [to improve its finances] are paying off, and the market is rewarding the government for its fiscal discipline," he said.
He said the sharp decline in the seven-year T-bond rate indicated that market confidence brought about by government's positive performance to curb its budget deficit and reduce debt was not only short-term.
Last Monday, Treasury bills rates also fell across the board, with the rate for 91-day bills hitting 4.961 percent, the lowest since August 2002.
Finance officials attributed the declining interest rates to the implementation of government financial reforms, which significantly cut the budget deficit in 2005.
An expanded value-added tax law, implemented on Nov. 1 and considered as the centerpiece of the reform program, is estimated to generate P81.4 billion in additional annual revenue and boost efforts to achieve a balanced budget by 2008. With INQ7.net
Copyright 2005 Inquirer, INQ7.net. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
copyright ©2006 INQ7money.net all rights reserved
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=04&file=2
Rate for 7-yr T-bonds drops to 9%
Posted: 0:56 AM Jan. 04, 2006
Inquirer
MARKET concerns on the government's long-term financial prospects have dissipated, judging by banks' response to seven-year Treasury bonds auctioned Tuesday, the Bureau of Treasury said.
The bond rate fell below the 10-percent mark at the auction, shedding 1.5 percentage points to 9.0 percent.
The seven-year T-bonds had fetched 10.5 percent when they were last auctioned on Nov. 15. National Treasurer Omar Cruz said his bureau had expected the interest rate to fall to 9.25 percent
"The market has now taken a long-term view on the fiscal position of the government by making very aggressive bids for the seven-year bonds," Cruz said in a press briefing after the auction.
Market players swamped the auction, submitting P12.08 billion worth of bids, more than thrice the P4 billion worth of bonds on offer.
Cruz said the drop in the bond rate could be expected to influence market response to other Treasury debt papers in coming auctions.
"Government efforts [to improve its finances] are paying off, and the market is rewarding the government for its fiscal discipline," he said.
He said the sharp decline in the seven-year T-bond rate indicated that market confidence brought about by government's positive performance to curb its budget deficit and reduce debt was not only short-term.
Last Monday, Treasury bills rates also fell across the board, with the rate for 91-day bills hitting 4.961 percent, the lowest since August 2002.
Finance officials attributed the declining interest rates to the implementation of government financial reforms, which significantly cut the budget deficit in 2005.
An expanded value-added tax law, implemented on Nov. 1 and considered as the centerpiece of the reform program, is estimated to generate P81.4 billion in additional annual revenue and boost efforts to achieve a balanced budget by 2008. With INQ7.net
Copyright 2005 Inquirer, INQ7.net. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
copyright ©2006 INQ7money.net all rights reserved
Tuesday, January 03, 2006
Benchmark T-bill yield drops to 4.961%, lowest in 3 years
By Des Ferriols
The Philippine Star 01/03/2006
http://www.philstar.com/philstar/news200601030701.htm
Treasury bill (T-bill) rates plummeted below the five percent mark yesterday, with the interest rate on the benchmark 91-day notes closing at a three-year low of 4.961 percent.
Market sentiments fueled the government’s first T-bill auction for the year, flooding the market with liquidity as expectations ran high amid a projected decline in the Arroyo administration’s borrowing requirement for 2006.
At yesterday’s auction, the 91-day T-bill offer was three times oversubscribed while the 182-day notes were nine times oversubscribed. The 364-day T-bill offer was over 11 times oversubscribed.
As a result of massive cash going into the system, the interest rates on the bellwether 91-day T-bills went down by 18.5 basis points to 4.961 percent while the 182-day notes plunged by 39.9 basis points to settle at 6.807 percent.
The interest rate on the one-year notes declined by 35.1 basis points to settle at 7.611 percent.
Records from the Bureau of the Treasury (BTr) indicated that yesterday’s average rate for the 91-day T-bills approached the three-year record of 4.299 percent set on March 30, 2002.
National Treasurer Omar Cruz told reporters that yesterday’s auction result was an overhang from last year’s momentum, spilling over into the early parts of the year.
"The effect of this momentum was also magnified by the anticipated reduction in the government’s borrowing program," Cruz said. "Everyone knows that what we are doing now will be based on our maturities, our cash position – all of which look good this year."
As a result, Cruz said banks opted to be aggressive since government securities offered this year are likely to be thin, a development that would not bode well for banks which are still reluctant to lend.
Market analyst said market liquidity was "horrendous" because banks are still "gun-shy towards lending."
Since the government’s T-bill offer this year is not likely to expand and could even go down, banks would have no other outlet and the rate will continue to go down, analysts said.
Interest rates would go down, said one analyst, because all banks are catering to only one credit-worthy client: the government. "It becomes a borrowers market in which the interest rates would go where the borrower tells it to go," he said.
Since the National Government has been the last and only creditworthy borrower in the market, yesterday’s performance of government T-bills is likely to be sustained at least during the early part of the year.
"I’d like to think that the market also has an intuitive sense of how our year-end fiscal performance is going to look like so they know we are starting off the year on the right footing," Cruz said.
Lower interest rates on government T-bills indicated that the Arroyo administration would not have to pay as much for its domestic borrowing but this means little to ordinary borrowers.
The decline in the T-bill rates only meant that prime borrowers would have access to increasingly cheaper funds while ordinary borrowers would remain out of the loop.
The determining factor would still be the confidence of the banking industry on the prospects of the manufacturing sector which was still operating below capacity, indicating that there was no demand for borrowing anyway.
The Philippine Star 01/03/2006
http://www.philstar.com/philstar/news200601030701.htm
Treasury bill (T-bill) rates plummeted below the five percent mark yesterday, with the interest rate on the benchmark 91-day notes closing at a three-year low of 4.961 percent.
Market sentiments fueled the government’s first T-bill auction for the year, flooding the market with liquidity as expectations ran high amid a projected decline in the Arroyo administration’s borrowing requirement for 2006.
At yesterday’s auction, the 91-day T-bill offer was three times oversubscribed while the 182-day notes were nine times oversubscribed. The 364-day T-bill offer was over 11 times oversubscribed.
As a result of massive cash going into the system, the interest rates on the bellwether 91-day T-bills went down by 18.5 basis points to 4.961 percent while the 182-day notes plunged by 39.9 basis points to settle at 6.807 percent.
The interest rate on the one-year notes declined by 35.1 basis points to settle at 7.611 percent.
Records from the Bureau of the Treasury (BTr) indicated that yesterday’s average rate for the 91-day T-bills approached the three-year record of 4.299 percent set on March 30, 2002.
National Treasurer Omar Cruz told reporters that yesterday’s auction result was an overhang from last year’s momentum, spilling over into the early parts of the year.
"The effect of this momentum was also magnified by the anticipated reduction in the government’s borrowing program," Cruz said. "Everyone knows that what we are doing now will be based on our maturities, our cash position – all of which look good this year."
As a result, Cruz said banks opted to be aggressive since government securities offered this year are likely to be thin, a development that would not bode well for banks which are still reluctant to lend.
Market analyst said market liquidity was "horrendous" because banks are still "gun-shy towards lending."
Since the government’s T-bill offer this year is not likely to expand and could even go down, banks would have no other outlet and the rate will continue to go down, analysts said.
Interest rates would go down, said one analyst, because all banks are catering to only one credit-worthy client: the government. "It becomes a borrowers market in which the interest rates would go where the borrower tells it to go," he said.
Since the National Government has been the last and only creditworthy borrower in the market, yesterday’s performance of government T-bills is likely to be sustained at least during the early part of the year.
"I’d like to think that the market also has an intuitive sense of how our year-end fiscal performance is going to look like so they know we are starting off the year on the right footing," Cruz said.
Lower interest rates on government T-bills indicated that the Arroyo administration would not have to pay as much for its domestic borrowing but this means little to ordinary borrowers.
The decline in the T-bill rates only meant that prime borrowers would have access to increasingly cheaper funds while ordinary borrowers would remain out of the loop.
The determining factor would still be the confidence of the banking industry on the prospects of the manufacturing sector which was still operating below capacity, indicating that there was no demand for borrowing anyway.
Government all set to raise VAT to 12%
this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=03&file=3
Government all set to raise VAT to 12%
Posted: 3:25 AM Jan. 03, 2006
Michelle V. Remo
Inquirer
Published on page B6 of the January 3, 2006 issue of the Philippine Daily Inquirer
THE national government has already met the two requirements stated under the Value Added Tax Reform Law, allowing authorities to raise the value added tax rate from 10 to 12 percent this year, according to the Department of Finance.
Under the new VAT law, the government could raise the VAT rate by two percentage points if it met either of the two conditions: a VAT collection-to-GDP (gross domestic product) ratio of at least 2.9 percent, and a budget deficit-to-GDP ratio of at least 1.5 percent. Finance Secretary Margarito Teves told reporters that, based on preliminary data, the two conditions had been met. "Assuming that the deficit hits P160 billion and GDP is P5.3 trillion, then that already translates to a deficit-to-GDP ratio of 3 percent," Teves said. Official figures on the VAT-to-GDP and deficit-to-GDP ratios will be available by the end of January. Once the figures are in, the increase in the VAT rate may be implemented on Feb. 1 as scheduled, Teves said.
The VAT Reform Law aims to improve the national government's fiscal standing by generating additional revenues. The law basically expanded the coverage of the tax to include oil and electricity, among others, starting last Nov. 1. The law also provided for the increase in the VAT rate this year. The DOF estimated that the tax measure, the centerpiece of the Arroyo administration's fiscal reform agenda, would generate P81.4 billion in additional revenues every year starting 2006.
copyright ©2006 INQ7money.net all rights reserved
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=03&file=3
Government all set to raise VAT to 12%
Posted: 3:25 AM Jan. 03, 2006
Michelle V. Remo
Inquirer
Published on page B6 of the January 3, 2006 issue of the Philippine Daily Inquirer
THE national government has already met the two requirements stated under the Value Added Tax Reform Law, allowing authorities to raise the value added tax rate from 10 to 12 percent this year, according to the Department of Finance.
Under the new VAT law, the government could raise the VAT rate by two percentage points if it met either of the two conditions: a VAT collection-to-GDP (gross domestic product) ratio of at least 2.9 percent, and a budget deficit-to-GDP ratio of at least 1.5 percent. Finance Secretary Margarito Teves told reporters that, based on preliminary data, the two conditions had been met. "Assuming that the deficit hits P160 billion and GDP is P5.3 trillion, then that already translates to a deficit-to-GDP ratio of 3 percent," Teves said. Official figures on the VAT-to-GDP and deficit-to-GDP ratios will be available by the end of January. Once the figures are in, the increase in the VAT rate may be implemented on Feb. 1 as scheduled, Teves said.
The VAT Reform Law aims to improve the national government's fiscal standing by generating additional revenues. The law basically expanded the coverage of the tax to include oil and electricity, among others, starting last Nov. 1. The law also provided for the increase in the VAT rate this year. The DOF estimated that the tax measure, the centerpiece of the Arroyo administration's fiscal reform agenda, would generate P81.4 billion in additional revenues every year starting 2006.
copyright ©2006 INQ7money.net all rights reserved
91-day T-bill rate falls to 40-month low
this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=03&file=1
Cash-rich banks swamp gov't auction
91-day T-bill rate falls to 40-month low
Posted: 2:14 AM Jan. 03, 2006
Michelle V. Remo
Inquirer
TREASURY bill rates fell across all maturities, with the yield of the 91-day securities dropping to a 40-month low, during the government's first auction for 2006 yesterday. The Bureau of Treasury said the auction results were due to optimism about the government's fiscal performance this year and the lingering high level of liquidity among banks coupled with the reduced volume of debt offering by the government for 2006. The rate for the 91-day bill, used as a benchmark by banks in pricing loans, breached the five-percent level to hit 4.961 percent. This was the lowest since August 5, 2002. "The decline in the rates was steeper than what the market expected. It was due to the liquidity overhang from last year and the government's more comfortable cash position (which allowed it to trim down its borrowings)," National Treasurer Omar Cruz told reporters in a briefing after the auction. The 182-day bills fetched a rate of 6.807 percent, 39.9 basis points lower than the last rate recorded for 2005. The rate for the 364-day paper hit 7.611 percent, 35.8 basis points lower than the previous level. The banks, still awash with cash, scrambled for the virtually risk-free government securities. The six-month debt instrument was more than nine times over-subscribed, with tenders reaching P9.1 billion compared with the debt offering of only P1 billion. The one-year government bills were over-subscribed by more than six times, as tenders stood at P9.59 billion compared with the debt offering of only P1.5 billion. Bids for the 91-day bill reached P2.86 billion, or more than twice higher than the P1 billion on offer. The P3.5-billion weekly treasury bill offering in the first quarter of this year was a reduction from the P4.5 billion in the fourth quarter of 2005. Cruz said the government could afford to borrow less because of the further improvement in the government's fiscal standing this year coming from an over-performance in 2005. Cruz said preliminary estimates showed that the national government would incur a budget deficit for the whole of 2005 that would be lower than P160 billion, or the low-end of the initial expectations by fiscal authorities. The Department of Finance earlier said the 2005 deficit could hit anywhere between P160 billion and P165 billion, better than the official target of P180 billion and lower than the P184.6-billion deficit in 2004. "The market has an intuitive sense of how we ended 2005 on a fiscal basis," Cruz said. He noted that the projected 2005 deficit of below P160 billion did not factor in the non-cash revenue collections of the Bureau of Internal Revenue and the Bureau of Customs, the government's biggest revenue earners.
Published on page B1 of the January 3, 2006 issue of the Philippine Daily Inquirer
copyright ©2006 INQ7money.net all rights reserved
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=03&file=1
Cash-rich banks swamp gov't auction
91-day T-bill rate falls to 40-month low
Posted: 2:14 AM Jan. 03, 2006
Michelle V. Remo
Inquirer
TREASURY bill rates fell across all maturities, with the yield of the 91-day securities dropping to a 40-month low, during the government's first auction for 2006 yesterday. The Bureau of Treasury said the auction results were due to optimism about the government's fiscal performance this year and the lingering high level of liquidity among banks coupled with the reduced volume of debt offering by the government for 2006. The rate for the 91-day bill, used as a benchmark by banks in pricing loans, breached the five-percent level to hit 4.961 percent. This was the lowest since August 5, 2002. "The decline in the rates was steeper than what the market expected. It was due to the liquidity overhang from last year and the government's more comfortable cash position (which allowed it to trim down its borrowings)," National Treasurer Omar Cruz told reporters in a briefing after the auction. The 182-day bills fetched a rate of 6.807 percent, 39.9 basis points lower than the last rate recorded for 2005. The rate for the 364-day paper hit 7.611 percent, 35.8 basis points lower than the previous level. The banks, still awash with cash, scrambled for the virtually risk-free government securities. The six-month debt instrument was more than nine times over-subscribed, with tenders reaching P9.1 billion compared with the debt offering of only P1 billion. The one-year government bills were over-subscribed by more than six times, as tenders stood at P9.59 billion compared with the debt offering of only P1.5 billion. Bids for the 91-day bill reached P2.86 billion, or more than twice higher than the P1 billion on offer. The P3.5-billion weekly treasury bill offering in the first quarter of this year was a reduction from the P4.5 billion in the fourth quarter of 2005. Cruz said the government could afford to borrow less because of the further improvement in the government's fiscal standing this year coming from an over-performance in 2005. Cruz said preliminary estimates showed that the national government would incur a budget deficit for the whole of 2005 that would be lower than P160 billion, or the low-end of the initial expectations by fiscal authorities. The Department of Finance earlier said the 2005 deficit could hit anywhere between P160 billion and P165 billion, better than the official target of P180 billion and lower than the P184.6-billion deficit in 2004. "The market has an intuitive sense of how we ended 2005 on a fiscal basis," Cruz said. He noted that the projected 2005 deficit of below P160 billion did not factor in the non-cash revenue collections of the Bureau of Internal Revenue and the Bureau of Customs, the government's biggest revenue earners.
Published on page B1 of the January 3, 2006 issue of the Philippine Daily Inquirer
copyright ©2006 INQ7money.net all rights reserved
Monday, January 02, 2006
DBP beefing up microfinance operations to support gov’t thrust
http://www.mb.com.ph/BSNS2006010253009.html
Manila Bulletin
Mon Jan 02,2006
State-owned Development Bank of the Philippines (DBP) is beefing up its microfinance operations in support of the national government’s thrust of promoting the growth of entrepreneurs in the country.
He cited recent meetings with the Bangko Sentral ng Pilipinas and the National Credit Council that has helped DBP in the formulation of policies and business practices best suited to address the risks and opportunities involved in microfinance ventures.
David also said that DBP continued to provide financing assistance to various micro-finance institutions in the country such as the Center for Agriculture and Rural Development (CARD) which was recently granted a P30-million loan assistance.
A non-stock, non-government organization that has been in the microfinance business for the past 18 years, CARD was ranked sixth best microfinance institution in the global microfinance category for outreach and sustainability by the Consultative Group to Assist the Poorest (CGAP) of the World Bank in 2003. CARD currently has 80 branches nationwide and serves the financial needs of over 80,000 active members.
DBP has likewise released a total of R265 million to the People’s Credit and Finance Corporation (PCFC) to assist 34 microfinance institutions in funding the livelihood activities of micro-entrepreneurs across the country.
PCFC acts as the government’s lead agency in the delivery of micro-finance services for the poor by mobilizing financial resources from both local and foreign sources. It currently serves the funding requirements of 208 microfinance institutions and over a million micro-entrepreneurs.
David meanwhile expressed confidence that DBP’s Microfinance Program can more efficiently cater to the financing needs of microentrepreneurs and thus help the Bank further attain its developmental objectives. He added that the program will greatly facilitate the fulfillment of the national government’s objective of encouraging the growth of 3 million entrepreneurs by 2010.
The DBP Microfinance program supports microenterprise development by facilitating the access of poor and low-income households to formal credit and banking services to grow their small businesses, and thus enable them to raise income levels and improve their living standards.
Most clients are poor and low-income households involved in microenterprises, usually household-based businesses, such as trading/buy-andsell, servicing/service shops, and food processing.
The program may be accessed, through microfinance institutions (MFIs), by micro-entrepreneurs engaged in manufacturing, and agri-businesses, and similar livelihood projects.
DBP’s partner-MFIs include rural banks, cooperative banks, thrift banks, development banks, commercial banks, savings and loan associations, non-government organizations, credit unions, and cooperatives.
$40M worth of loans for microfinancing OKd
this story was taken from www.inq7money.net
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=02&file=2
Michelle V. Remo
$40M worth of loans for microfinancing OKd
Posted: 12:07 PM Jan. 02, 2006Inquirer
Published on Page B8 of the January 2, 2006 issue of the Philippine Daily Inquirer
THE BANGKO SENTRAL NG PILIPINAS HAS approved the government's plan to take out up to $40 million worth of foreign loans to fund microfinance programs in the rural areas and infrastructure projects in Mindanao.
BSP Governor Amando M. Tetangco Jr. said the Monetary Board, the BSP's policy-making body, approved last week an $18.63-million loan intended to support microenterprises in the provinces.
The loan will come from the International Fund for Agricultural Development, and will be used to provide credit to microenterprises in rural areas. The loan was intended to complement the Arroyo administration's agenda of generating more jobs including those generated by micro-businesses.
The loan proceeds will be given to the Small Business Guarantee and Finance Corp. (SBGFC), an attached agency of the Department of Finance tasked with providing credit access to micro, small and medium enterprises.
Tetangco said the credit facility to be created by the loan would be made available to microenterprises in places like the Cordillera region, Sorsogon, Cotabato, Sarangani, General Santos, Caraga, Bicol and Eastern Visayas.
The central bank chief said the loan will have a 40-year maturity and will be interest-free. It will, however, carry a yearly service charge of 0.75 percent, he added.
The Monetary Board likewise approved the undertaking of a $20-million loan extended by the Saudi government to the Philippines to help finance infrastructure development projects in Mindanao, particularly in Cotabato and Lanao provinces.
Tetangco said this loan would carry a 25-year maturity and an interest of 2 percent per year.
Aside from the estimated $40 million loan already approved by the Monetary Board, another $25 million worth of credit will be formally approved by the central bank's policy-making body.
Tetangco said members of the Monetary Board had already approved in principle the undertaking of a $25-million loan from the Sumitomo-Mitsui Banking Corp. to facilitate the regular importation by the National Food Authority (NFA).
He said the NFA loan would be used to pay for rice importation made in 2005 and additional importation this year.
Copyright 2005 Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
URL: http://money.inq7.net/topstories/view_topstories.php?yyyy=2006&mon=01&dd=02&file=2
Michelle V. Remo
$40M worth of loans for microfinancing OKd
Posted: 12:07 PM Jan. 02, 2006Inquirer
Published on Page B8 of the January 2, 2006 issue of the Philippine Daily Inquirer
THE BANGKO SENTRAL NG PILIPINAS HAS approved the government's plan to take out up to $40 million worth of foreign loans to fund microfinance programs in the rural areas and infrastructure projects in Mindanao.
BSP Governor Amando M. Tetangco Jr. said the Monetary Board, the BSP's policy-making body, approved last week an $18.63-million loan intended to support microenterprises in the provinces.
The loan will come from the International Fund for Agricultural Development, and will be used to provide credit to microenterprises in rural areas. The loan was intended to complement the Arroyo administration's agenda of generating more jobs including those generated by micro-businesses.
The loan proceeds will be given to the Small Business Guarantee and Finance Corp. (SBGFC), an attached agency of the Department of Finance tasked with providing credit access to micro, small and medium enterprises.
Tetangco said the credit facility to be created by the loan would be made available to microenterprises in places like the Cordillera region, Sorsogon, Cotabato, Sarangani, General Santos, Caraga, Bicol and Eastern Visayas.
The central bank chief said the loan will have a 40-year maturity and will be interest-free. It will, however, carry a yearly service charge of 0.75 percent, he added.
The Monetary Board likewise approved the undertaking of a $20-million loan extended by the Saudi government to the Philippines to help finance infrastructure development projects in Mindanao, particularly in Cotabato and Lanao provinces.
Tetangco said this loan would carry a 25-year maturity and an interest of 2 percent per year.
Aside from the estimated $40 million loan already approved by the Monetary Board, another $25 million worth of credit will be formally approved by the central bank's policy-making body.
Tetangco said members of the Monetary Board had already approved in principle the undertaking of a $25-million loan from the Sumitomo-Mitsui Banking Corp. to facilitate the regular importation by the National Food Authority (NFA).
He said the NFA loan would be used to pay for rice importation made in 2005 and additional importation this year.
Copyright 2005 Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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