050107: T-bill rates rise across the board

TREASURY bill rates moved up across the board on Monday, forcing Treasury chief Omar Cruz to sell only P2.4 billion or less than half the intended sale of P5 billion. Cruz let pass the opportunity to sell for P2 billion in one-year T-bills; its rate would have been pushed 77 basis points higher to 4.59 percent had he accepted. He said the strengthening pressure on short-dated government borrowings is a clear sign of the market’s disappointment over the first-quarter performance of the fiscal sector. “We have been penalized for our budget slippage in the first quarter. That’s how markets are.” Three-month T-bills, now no longer a benchmark, moved up 9.2 basis points to 3.044 percent from 2.952 percent. Cruz allowed the sale of an extra P400 million of 91-day T-bills for a total P1.4 billion. But he sold all P2 billion worth of 6-month T-bills on sale on Monday whose rate also moved up 16.1 basis points to 3.721 percent from 3.56 percent. In addition to the fiscal slippage, the mid-term election added a new dimension to the market’s diminished appetite for short-dated government securities. “This is a typical market reaction.” Also, Cruz cited the lack of a definite rate on a special paper being offered by the Bangko Sentral ng Pilipinas to siphon excess liquidity in the system. The BSP has yet to announce the effective rate the banks and financial institutions would get should they invest in a special deposit account or SDA facility. “The market continues to speculate where this rate would be and until the BSP defines its so-called market determined rate for SDAs, the market will continue to make throw-away bids.” Deputy BSP governor Diwa Guinigundo said the monetary board was committed to announce the effective SDA rate as soon as this was determined. SDAs and two other anti-liquidity measures become available beginning May 10, and with these together the central bank expects to help curb the rapid rise in domestic liquidity growth that has given it a bad case of inflationary jitters. Guinigundo said the SDAs should attract enough funds from the various trust units, banks as well as from government-owned or -controlled corporations, to slow down liquidity growth to “below 20 percent.”  --J. Vallecera

 

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