91-day T-bill rate falls to 40-month low

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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

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