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 PRESSROOM / NEWS
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 | Republic of the Philippines
DEPARTMENT OF FINANCE
Roxas Boulevard Corner Pablo Ocampo, Sr. Street
Manila 1004
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May 31, 2010
T-BILL RATES: MAY 31, 2010
BTr
FPPO-JEP
The National Government today chose to limit once more the sale of its Treasury Bills. It sold only P1.605 billion worth of 182-day debt, rejecting bids for both the 91-day and the one-year debt. The Auction Committee’s decision today was to keep the yields from rising unreasonably as bids today were off-market, higher than the prevailing rates in the secondary market. Caution once more ruled market sentiment amidst inflation concerns and uncertainties over the direction of policy rates given the recent economic developments. Panic-stricken bond market demanded premium today on the fear that the better-than-expected gross domestic product (GDP) growth data for the first quarter of this year will possibly post risks on the domestic prices. Consequently, any expectations of an increase in inflation will impose pressure for monetary policy changes. Bond market was seemingly unsure as to what the central bank would do with the monetary policy on its next meeting. But given that the government has continuously indicated that it has comfortable cash position with the success of its off-shore floats this year, it has the option to make partial awards or to even reject bids it deems unacceptable just as what happened today. This move signaled once again the bond market that the government is unwilling to give in to the upward pressure in the borrowing costs particularly if bids were not aligned with the movement in the secondary market.
Last week, the government announced that the domestic economy grew by 7.3 percent in the first quarter of the year, way higher than both the 2.9 to 3.9 percent forecast range for the period and the 2.6 to 3.6 percent full year growth target. On the other hand, the downgrading of Spain’s credit rating has led to jitters in Europe thus putting questions on the sustainability of world economic recovery. Meanwhile, the Monetary Board of the Bangko Sentral ng Pilipinas is scheduled to hold its Monetary Board meeting on Thursday to revisit its key policy rates. Since July of last year, the Monetary Board has kept its key policy rates unchanged at 4 percent for the borrowing rate and 6 percent for the lending rate in support of the domestic economy.
The Bureau of the Treasury was supposed to auction P8.0 billion worth of the T-bills today. While it made a partial award for the 182-day, it rejected all the bids for both the 91-day and the 364-day T-bills. Borrowing costs would have risen significantly if it had decided to sell both the 91- and the 364-day debts. The rate of the benchmark 91-day T-bill would have increased by 6.3 basis points to 3.929 percent, up from 3.866 percent in the previous auction. Tenders for this paper reached P3.75 billion against the P1.5 billion offering. The one-year debt would have fetched 4.615 percent, 12.3 basis points higher than the previous rate of 4.492 percent had the Auction Committee accepted the bids. Subscriptions for this paper reached P4.67 billion against the P3.5 billion offering, relatively thin as compared with the tenders of the previous auctions. For the 182-day, the Auction Committee made a partial award worth P1.605 billion at an average rate of 4.111 percent, down by 0.2 basis point from the 4.113 percent last May 17 auction. Had the Auction Committee made a full award, the paper would have fetched 4.156 percent, 4.3 basis points higher than the previous rate. The paper was more than twice oversubscribed with tenders at P6.545 billion against the P3.0 billion offering.
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