Gov't allows short-term T-bill rates to go up

The Treasury bureau sold P8.5 billion worth of Treasury bills at Monday's auction on the back of strong investor demand for short-term government debt instruments. The auction committee allowed the rates to move up slightly, saying that the sideways movement for the 91- and 182-day T-bills was within expectations. National Treasurer Roberto Tan cited lingering investor anxiety over the government's worsening budget deficit and political jitter as the May elections near. Because of these concerns investors prefer to park their cash in debt paper with shorter terms. "There is prevailing uncertainty [brought about] by a combination of issues, including the elections," he said. The average rate of the 91-day Treasury bill, which banks use to price their loans, rose by 3.8 basis points to 3.935 percent from 3.897 percent in the previous auction. Banks' bids ranged from 3.875-4 percent. Bids reached P4.03 billion, twice the P2-billion offer size for the three-month paper. The auction committee also allowed the rate of the 182-day T-bill to go up by 3.5 basis points to 4.2 percent. Bids ranged from 4.135-4.205 percent, while tenders reached P10.24 billion. The auction committee sold P3 billion worth of the paper. On the other hand, the average rate of the 364-day T-bill shed 4.7 basis points to 4.62 percent. The auction committee fully awarded the P3.5-billion offer, while total bids reached P10.38 billion. Tan said the Treasury bureau was ready to reject bids deemed too high to prevent the government's borrowing cost from going up. Yesterday's total sale of P8.5 billion worth of Treasury bills forms part of the government's plan to borrow P110.5 billion in the first quarter of the year, a fifth higher than a year earlier. The state is expected to sell P51 billion worth of T-bills and P59.5 billion worth of Treasury bonds this quarter. The government borrows from the local market by selling Treasury bills and bonds. It expects the budget deficit to hit P293 billion this year from an estimated budget gap of P290 billion last year. NPA, GMANews.TV