At yesterday’s offering of CMBs, the 42-day tenor got a rate of 16.0459 percent which effectively set the rate for prime corporate borrowers at 21 percent.
The rate for the 63-day CMB was recorded at 16.819 percent.
Rates for the 91-day Treasury-bill (T-bill) had been used as the benchmark by banks in pricing their loans. But this was abandoned by the BSP because of government is continued effort to maintain a low interest rate policy.
The CMB rate will now serve as the temporary benchmark for all short-term borrowings instead of the 91-day T-bills.
BAP president Placido Mapa said earlier the CMB rate will only be used if it is "realistic."
But judging from the response of the market to the CMB offering, it appears that the market is contented with the rate it got.
The National Government successfully raised almost P14 billion from its initial offering of CMBs yesterday.
Deputy Treasurer Eduardo Mendiola said the government was "happy with the result," adding that the offering "raised more than enough to cover more than the three series of rejections in the regular T-bill auction."
Mendiola said the government expects some more bids today and Friday as the BTr is keeping open its tap facility for two more days.
The initial response, according to Mendiola, augurs well for the regular auction of the CMBs starting next week.
The government opted to use the tap facility this week following the failure of the regular T-bill auction on Monday which resulted in the full rejection of all three tenors.
However, next week, the CMBs would no longer be offered through the tap facility, but would be offered through an auction system. The tap facility basically allows for a negotiated sale.