T-BILL RATES DOWN ACROSS THE BOARD
MANILA, AUGUST 1, 2006 (STAR) By Donnabelle L. Gatdula - Treasury bill (T-bill) rates tumbled across the board yesterday on an upbeat economic outlook and hopes US interest rate increases may come to an end.
The rate for the 90-day bill, which banks use as a benchmark for loan rates, dropped to 5.447 percent from 6.078 percent at the previous sale on July 17. The 182-day yield fell to 6.557 percent from 6.994 percent while the rate for the 364-day tenor dropped to 7.503 percent from 7.815 percent.
National Treasurer Omar Cruz said the drop in T-bill rates was due to optimism about the government’s fiscal performance and hopes of a continued drop in local interest rates.
"We see it dropping much more with the improving liquidity position of the market and sound fiscal position of the NG (National Government)," Cruz said.
According to Cruz, the market has been seeing the improvement in the country’s fiscal position as the government opts to borrow less.
Cruz said the offers made by the market across all tenors were overwhelming.
For the three-month government debt papers alone, bid applications reached P5.75 billion as against the debt offering of only P1.2 bilion.
"In anticipation of better fiscal position, NG has some flexibilities on its borrowings this year," he said.
To date, Cruz said they have already reduced NG’s foreign borrowing from the original target of $950 million to only $750 million.
"We have to look at the (budget) deficit that we need to fund to determine how we could balance our borrowing requirement program," he said.
To date, Cruz said they have borrowed 59 percent from domestic market and 41 percent from foreign sources. But Cruz pointed out that this is still close to the government’s borrowing program of 58-42 percent strategy in favor of domestic borrowing.
"We will know by the end of this quarter if we will have to adjust our borrowing program. We will study the market if we need to offer longer or shorter maturities," Cruz said, when asked if the Bureau of Treasury (BTr) would change its borrowing tact with the drop in the interest rates to record low levels.
Early this year, Cruz had been saying that domestic interest rates would go down further with the government’s move to consolidate its domestic debts.
"As we attract foreign investors to buy peso government bonds, the larger supply of capital will force interest rates down," Cruz said.
Chief News Editor: Sol Jose Vanzi
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