Gov't determined to keep T-bill rates from rising

The government will not allow Treasury bill (T-bill) rates to climb in tomorrow's auction as it has enough cash to reject high bids, Finance Secretary Jose Pardo said over the weekend.

He said T-bill rates would most likely move sideways only or remain unchanged. Dealers expect T-bill rates to move up again this week after the Bangko Sentral ng Pilipinas (BSP) raised its overnight rates by one percentage point on May 17 and 19 to align its rates with that of the US.

"I gave her (Treasurer Leonor Briones), a set of instructions. We are ready to reject. Most likely, it (T-bill rates) will move sideways," he said. "We have built up our cash balance by borrowing when rates were still lower in the US," Pardo said.

As of end-April, the Bureau of Treasury had a cash balance of P162.314 billion, up from P115.470 billion in end-December.

Higher T-bill rates translate into higher lending rates as banks use these rates as their benchmark for pricing loans.

Pardo, however, said there was no decision yet to trim down the volume of T-bills to be offered, noting that the government might need extra cash for the rest of the year.

The government, he said, will try to ward off any increase in the interest rates on its IOUs to encourage banks to lend to the private sector. He said banks are attracted to place their funds in government securities not only because of the high yields but because these are considered safe instruments being backed up by the government.

In fact, he said he opposed any move of the Monetary Board, the policy-making body of the BSP, last week to raise anew its overnight rates by another 50 basis points. He said bringing up rates would affect the recovery of the economy this year since it would discourage businesses from borrowing.

"As Secretary of Finance, I think it would not be timely to look at another increase in overnight rates," he said.

At last Monday's auction, T-bill rates inched up on all tenors, forcing the Bureau of Treasury to award less than half of the P4-billion offering.

The 91-day T-bill rate, used by banks as a benchmark for pricing loans, rose by 28.5 basis points to 8.975 percent from 8.690 percent last week. The 182-day rate climbed by a hefty 47.5 basis points to 10.375 percent from 9.9 percent. The 364-day rate increased by 46 basis points to 11.423 percent from 10.963 percent. -