Benchmark T-bill rate eases to 3.759%

The rates of government’s short-term debt papers eased during yesterday’s auction as investors stayed on the sidelines ahead of the Bangko Sentral ng Pilipinas’ (BSP) monetary board meeting on Oct. 4.

The average rate of the 91-day Treasury bill (T-bill) slipped to 3.759 percent from 3.769 percent previously. The Bureau of the Treasury (BTr) awarded P960 million worth of the debt paper as total tenders reached P2.15 billion.

Similarly, the average rate of the 182-day debt paper also went down to 4.832 percent from 4.842 percent previously. The BTr made a partial award of P1.5 billion out of total tenders of P3.97 billion.

On the other hand, the government allowed the rates for the 364-day T-bill to rise to 5.643 percent from 5.607 percent previously. Total tenders reached P3.52 billion as the auction committee made an award of P960 million.

Finance Undersecretary and Acting National Treasurer Roberto Tan said market investors have adopted a cautious stance ahead of the BSP’s rate-setting meeting next week.

“The market is waiting for what the BSP will do in response to the Federal Reserve’s drop in its fund’s rates. Everybody is waiting for a response from the BSP,” Tan told reporters after the auction.

The US Fed slashed its key policy rates to 4.750 percent to contain inflation in the US economy. All eyes are now at the BSP on whether it would make a similar move.

Last July 12, the BSP slashed its overnight borrowing rate to six percent from 7.5 percent and the overnight lending rate to eight percent from 9.75 percent.

This was the first time in four years that the BSP reduced the key interest rates and the first rate change since October 2005 when the rates were adjusted upwards.

The BSP usually matches an increase in Fed rates so as not to discourage investors to park their funds in higher-yielding instruments.

Tan said that external developments such as the ongoing credit crunch in the United States still have an impact on the market although this has somewhat eased.

“Concerns on the subprime market are still there but it’s not creating a serious reaction as before,” Teves said.

Investor concerns on the government’s fiscal position on the other hand, have eased after the government posted a budget surplus in August of P13.9 billion amid strong revenues.

The August surplus allowed the government to trim its budget deficit to P25.5 billion in the first eight months of the year from P39.4 billion in the January to July period.