Treasury bill rates drop to all-time lows Treasury bill rates declined during Tuesday’s auction—the last government offering for the year—and hit a new all-time low as banks awash in cash scrambled for the virtually risk-free securities. The rate for the bellwether 91-day T-bill only reached 0.775 percent from the previous rate of 1.48 percent. This was the first time the interest rate for a government debt security fell below one percent. Tenders for the three-month securities reached P4.1 billion, about four times the government’s debt offering of only P1 billion. The 182-day bill fetched a rate 1.65 percent—down from the previous rate of 1.983 percent. Volume of bids for the six-month debt instruments hit P8.33 billion, exceeding the government’s offering of P2.5 billion. Also, the rate for the 364-day bill settled at 2.383 percent from 2.394 percent of the previous auction. Tenders for the one-year bill reached P7.96 billion—over twice as much as the government’s offering of P3.5 billion. “There are so much funds in the system. Banks scrambled for the T-bills given that it is the last auction for the year,” National Treasurer Roberto Tan said in a briefing after the offering. Jonathan Ravelas, market strategist for Banco de Oro, the low Treasury rates were due to the substantial liquidity in the system and renewed risk aversion resulting from Europe’s debt woes. Ravelas said some foreign investors decided to shift funds from the equities market into safer havens, including government securities and the dollar. “The drop in interest rates is a function of huge liquidity. Moreover, uncertainties in the international front brought about by the debt crisis in Europe is pushing investors to assets considered much less risky,” Ravelas said. According to Tan, another reason for the low interest rates is the low inflation outlook. The Bangko Sentral ng Pilipinas expected annual inflation for November to range between 2 and 2.9 percent. Based on this projection, inflation in the first 11 months of the year could settle anywhere between 3.8 to 3.9 percent—closer to the lower end of the official cap set at between 3.5 and 5.5 percent. The BSP believes that the low inflation environment may remain over the short term. As a result, there would be no reason for banks to seek high yields from government securities, officials said.
THE BUREAU of Internal Revenue (BIR) has all but abandoned this year’s collection goal as it likely missed its target last month. "I don’t know if [we were] able to reach it (the November target) because the goal is too high," BIR Commissioner Kim S. Jacinto-Henares said in a telephone interview yesterday. She did not provide estimates but noted that last month’s P86.03-billion goal was nearly 23% more than the actual take of around P70 billion a year earlier. November data will be released by Dec. 15, Ms. Jacinto-Henares said. The BIR -- which accounts for about two-thirds of the state’s tax revenues -- remains behind target with collections at P670.8 billion as of October, below the P700-billion goal for the period. Blame has been laid on the government’s adoption of a higher 2010 economic growth target -- 5.0-6.0% from 2.6-3.6% previously -- which meant that the BIR’s collection goal had to be raised to P860.4 billion from P830.4 billion. "The P860.4-billion [2010 goal] is no longer possible ... [but] P830 billion is doable," Ms. Jacinto-Henares said. She explained that to meet the full-year target, the BIR needed to collect an extra P30 billion on top of its P73.78-billion goal for December. "That would be very hard [to meet], that’s why I say the P860-billion target, to be able to be met, really needs a stretch [by the BIR]," she said. Missing the November goal would add pressure to the budget deficit as the Customs bureau, the country’s second main revenue agency, has already said it may have missed its P26.93-billion target last month. |
| U.S. Stocks Decline on European Debt Concern; Google Slumps on EU Probe U.S. stocks declined, preventing the third straight monthly advance for the Standard & Poor’s 500 Index, amid concern that Europe’s government debt crisis will worsen and as Google Inc. faced an antitrust probe. Google fell 4.5 percent, the most since July, after European Union antitrust regulators began an investigation. EBay Inc. dropped 3.6 percent after the stock’s rating was cut at Piper Jaffray & Co. Bank of America Corp. slumped 3.2 percent, the most in the Dow Jones Industrial Average, as the cost to insure its debt against default climbed to a 16-month high. The S&P 500 fell 0.6 percent to 1,180.55 at 4 p.m. in New York, below its end-of-October level of 1,183.26. The Dow lost 46.47 points, or 0.4 percent, to 11,006.02. Stocks briefly erased declines as President Barack Obama suggested he’s willing to compromise with Republicans on extending tax cuts.
Thirty-year bond yields pared declines after reaching the lowest in three weeks as the Federal Reserve bought more U.S. securities as part of its $600 billion plan to bolster the economy. Industry reports showed consumer confidence rose and Midwest regional businesses expanded. The dollar reached a 10- week high versus the euro as Portuguese, Italian and Spanish government bonds slumped, encouraging demand for a refuge. “The longer end has come off some as we’ve had a good rally the last few days and with economic news better, and month-end buying out of the way, investors are becoming more defensive when it comes to duration,” said Thomas Tucci, head of U.S. government bond trading at Royal Bank of Canada’s RBC Capital Markets unit in New York, one of 18 firms that trade directly with the Fed. “The economic news, while not great, is not as weak as it’s been. So we are seeing people take profits.” Two-year note yields fell six basis points to 0.46 percent at 5:10 p.m. in New York, touching the lowest since Nov. 23, according to BGCantor Market Data. Benchmark 10-year yields declined two basis points to 2.8, after falling as much as seven basis points, paring the monthly increase to 14 basis points. Thirty-year bond yields fell three basis points to 4.11 percent, after touching the lowest since Nov. 5. The decline reduced the so-called long bond’s monthly yield increase to 13 basis points. |
| Oil Falls as Heating Fuel Drops, European Debt Woes Signal Lower Demand Oil fell, following heating oil lower, as concern the European Union may have to bail out more member states pushed the euro to the lowest level in 10 weeks. Crude dropped more than $1 a barrel in the last half hour of floor trading, led by declines in heating oil before the expiration of the December contract today. The cost of insuring Portuguese and Spanish debt against default climbed to records yesterday after Ireland accepted a bailout package. “Oil has fallen on the possibility that the problems that are going on in Europe will spread to Portugal and Spain and maybe Italy and Belgium,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. Oil for January delivery dropped $1.62, or 1.9 percent, to settle at $84.11 a barrel on the New York Mercantile Exchange. Prices rose 3.3 percent this month, the third consecutive increase, and are up 6 percent this year. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
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