BTr may stop issuing short-term bills next week

The Bureau of Treasury (BTr) may stop issuing cash management bills (CMBs) next week as interest rates appear to have stabilized.

This was revealed by National Treasurer Leonor Briones following yesterday’s full award of another P5-billion worth of CMBs, with the yields moving downward to align themselves with the Treasury bill rates posted Monday.

The 42-day CMBs commanded an average yield yesterday of 15.839 percent, down 33.3 basis points from the last auction.

The 70-day CMBs fetched an average of 16.386 percent, a slide of 39.3 basis points from the previous auction.

Briones said yesterday’s auction was "great" as investors continued to rush for the CMBs. The CMB auction was oversubscribed, which, according to Briones, "is an indication that liquidity is back in the market.

Government, Briones said, is hoping that the trend continues.

"We hope it‘s the stat of the stabilization of the financial markets," Briones said.

Bangko Sentral ng Pilipinas (BSP) Gov. Rafael B. Buenaventura, said the drop in CMB yield was necessary as the 42-day rates cannot be higher than the 91-day yield.

He said the market is apparently taking seriously the government’s statement that it is determined to eventually bring down rates again and that the current high yields are temporary.

Because of the favorable results in the regular T-bill auction Monday and the CMB awards yesterday, Briones said, that the BTr will meet this week, probably Thursday, to assess the situation and decide if it is time to discontinue the CMB issuance and go back to the normal T-bill auction.

Likewise, Briones said the market may also be ready for the resumption of offering of the longer-term Treasury bonds.

The CMBs were resorted to as a temporary measure after several weeks of T-bill rejection. There has bene a strong appetite for the higher yielding, but shorter-term CMBs.

But Monday’s regular T-bill auction saw rates finally aligning with the CMB rates.

Buenaventura said that with the proper alignment of interest yields, the banks should stick to their pledge of maintaining five-percentage point spread on their lending rates.