Cash bill yields soften further

Rates for the government’s high-yielding cash management bills (CMBs) continued to soften at yesterday’s auction, prompting the government to proceed with the roadshow for its 25-year Treasury bonds (T-bonds).

Sources said government is now ready to scrap the CMBs as local investors have started to reinvest their money in Treasury bills (T-bills) and other government bonds.

Rates for the 42-day CMBs settled at 15.097 percent, down 3.3 basis points from the previous week’s average of 15.13 percent, while that of the 70-day CMBs eased by 46.1 basis points to 15.109 percent from 15.57 percent a week ago.

Bid applications at yesterday’s auction amounted to P5.975 billion, resulting in the full award of the P3.5-billion offering.

The Bureau of Treasury (BTr) said the government will no longer offer the 42-day CMBs next week, but would maintain the 70-day CMBs.

The treasury department said the issuance of the P2 billion worth of 25-year T bonds will be done today.

National Treasurer Leonor Briones said pricing for the issuance will be set on Monday, Nov. 27.

She said the yield for the 25-year bonds would have to be at least 25 basis points higher than the yield for the 20-year bonds in the secondary market.

Analysts said government is confident that with the continued drop in rates for the short-term T-bills, the local financial market will be attracted to park their funds anew in the longer-term government securities.

They said the CMBs were intended from the start to be temporary in nature and will be phased out as soon as the market finds a satisfactory yield level.

As yields on government securities started to soften, the Bangko Sentral ng Pilipinas is evaluating the possibility of bringing down its key policy rates.

BSP Governor Rafael B. Buenaventura said the Monetary Board will decide on Friday if the overnight rates can now be brought down. – Marianne Go