T-bill rates drop across the board

Treasury bill (T-bill) rates fell across the board yesterday, with tenders nearly three times the government’s offer of P6 billion as investors competed for limited supply of government securities.

The auction committee headed by the Bureau of Treasury (BTr) made a full award of P2 billion each of the 91-day, 182-day and 364-day T-bills.

The average rate on the 91-day T-bills averaged 5.465 percent, down from 5.473 percent in the previous auction with tenders reaching P3.29 billion.

On the other hand, the average rate on the 182-day notes was at 5.771 percent, also down from 5.790 percent. Tenders totaled P5.7 billion.

The 364-day rate, however, had the largest over-subscription with tenders reaching P7.79 billion as rates averaged 6.575 percent, down from 6.713 percent previously.

National Treasurer Omar Cruz told reporters after the auction that the market was awash with liquidity, with the bulk of the appetite somewhat focused on longer-tenor instruments, particularly the one-year notes.

"The outlook is more sideways to downward," Cruz said. "I believe this will continue to be a good market especially now that the spreads on ROP bonds are at an all-time tight."

However, Cruz said there were no indications of any change in the government’s borrowing program for the rest of the year despite the dramatic decline in the budget deficit.

"We’re not going to touch that yet, we will alter it only if conditions warrant such a move," he said, adding that such "conditions" would depend on the fiscal position and if the improvement is of the magnitude that would require the adjustment in borrowing.

But Cruz admitted that government revenues from taxes on government securities would continue to go down as the government holds back its borrowing.

"But it’s a happy problem," Cruz said. "The amount we lose in terms of taxes on government securities is more than made up for by the amount we save from our declining borrowing requirements."

In 2007, Cruz said the government’s borrowing requirement would be even less, with the borrowing mix at 67:33 in favor of domestic borrowing.