Benchmark T-bills decline to 5.666%

The yield for the benchmark 91-day Treasury bill (T-bill) fell below the six-percent level yesterday, following the decision of the Bangko Sentral ng Pilipinas (BSP) to ease its monetary policy.

The average rate for the 91-day T-bills tumbled by 63.6 basis points to settle at 5.666 percent from 6.302 percent during the previous auction. The rate was the lowest since Jan. 20 when it reached 5.248 percent.

Prior to the auction, debt traders said T-bill rates are expected to slide by between 20 -50 basis points after the BSP restored last week the tiering scheme for funds placed by commercial banks

The tiering move is expected to coax banks to shift some funds parked with the BSP back into government securities.

The yield for the 182-day T-bills dipped by 67 basis points to 6.479 percent from the previous 7.157 percent while that of the 364-day T-bills fell to 6.898 percent from the previous 7.804 percent.

National Treasurer Sergio G. Edeza said they expect interest rates to continue to decline as the tiering scheme has already forced the rates to ease by an average of seven percentage points.

"It is a function of excess liquidity and the good fiscal performance as well, that resulted in lesser borrowing needs for the government," Edeza said.

Government officials said the drop in interest rates could impact on the cost of retail Treasury-bonds (RTBs) which will be auctioned off on June 12.

Finance Secretary Jose Isidro Camacho and Edeza signed the memorandum of agreement yesterday giving the underwriting assignment for the three-year and five-year RTBs to the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP) with Hongkong and Shanghai Bank Corp. (HSBC) acting as the bookrunner.