T-bill rate climbs to 6.915%

The average rate of the 364-day Treasury bill (T-bill) rose to 6.915 percent yesterday from the previous auction’s  5.993 percent.

The government’s auction committee accepted P1.971 billion worth of bids as total tenders reached P6.462 billion.

Finance Undersecretary and Acting National Treasurer Roberto Tan attributed the rise in interest rates to skyrocketing inflation.

The nationwide inflation rate rose to 8.3 percent in April, its highest level since 2005. Inflation was recorded at only 6.4 percent in March.

Tan said the inflationary expectations of investors are the reasons behind the high interest rates.

“What we want to do is to move with the market,” Tan said.

Had the auction committee accepted all the bids, the average rate for the one year debt paper would have risen to 7.111 percent.

Due to the waning appetite for government debt papers, fiscal authorities said there may be a review of the government’s borrowing mix.

“That will probably be a part of the review of the macroeconomic assumptions,” Tan said.

Finance Secretary Margarito Teves earlier said the National Government (NG) may further reduce its foreign borrowings this year and change the borrowing mix to 75-25 percent in favor of domestic sources.

The latest borrowing mix is 30 percent from foreign sources and 70 percent from domestic sources. Tan said this has not changed. “Right now, it’s still 70-30,” Tan said.

The Bangko Sentral ng Pilipinas (BSP) has been trying to temper the steady rise of the peso which is now trading atthe P42-to-the-dollar-level.

It thus proposed to the National Government to reduce its foreign borrowings so as not to aggravate the steady appreciation of the peso against the dollar. Exporters have been complaining against the rapid appreciation of the peso against the dollar which has been diminishing the value of their dollar earnings. Aside from cutting its foreign borrowings, thegovernment is also looking into prepaying its foreign debts.