MANILA, October 12, 2004 (STAR) By Des Ferriols - Treasury bill (T-bill) rates went up across the board yesterday on rising concerns over the government’s looming fiscal problems and the unabated increase in global oil prices which is expected to create an upward pressure on consumer prices.

At yesterday’s auction at the Bureau of Treasury (BTr), rates for the benchmark 91-day T-bills – which banks use to price their loans – went up to 7.772 percent from the previous 7.639 percent.

The auction committee decided to reject P1.030- billion worth of tenders out of total bid applications worth P4.185 billion to temper the rise in 91-day T-bills.

Rates for the 182-day notes also went up to 8.845 percent from the previous rate of 8.536 percent while that of the 364-day bills rose to 9.975 percent from 9.904 percent.

Sources said the auction committee allowed the rates to rise to release the market’s pent up demand for the risk-free instrument.

For the 182-day notes, the committee received total tenders worth P2.395 billion but accepted only P1.995 billion, rejecting P400 million.

For the one-year notes, total tenders amounted to P4.655 billion and the committee rejected P1.655 billion, accepting only P3 billion.

Treasury officials said the market was expecting inflationary pressure from the unabated increase in the prices of oil and petroleum products in the world market.

Although the country’s dependence on imported oil has declined with the shift in the country’s sources of power, the impact on transport costs and the calls for wage adjustment were anticipated to create pressure on the policy rates of the Bangko Sentral ng Pilipinas (BSP).

The BSP has repeatedly said it would not lift a finger to address what was basically a supply-side problem but the BTr said banks did not expect monetary policy to remain unreactive for long.

The BSP indicated that its inflation target would stay at four to five percent for 2004, adding that despite the surges in the last three months, the year-to-date average was still 4.8 percent–well within the target range.

However, the BSP admitted that forecasts show the average annual rate exceeding its 2004 target.

Despite this, the Monetary Board still decided to maintain its policy rates at 6.75 percent for the overnight reverse repurchase and nine percent for the overnight repurchase rate.

Reported by: Sol Jose Vanzi

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