Seal of Bangko Sentral ng Pilipinas (1993-2010) (Photo credit: Wikipedia)Financial IQ Philippines Quick Hit(s):
Due to the low bank interest rates, investors are now seeking other investment instruments. If you have not started buying bonds and is still saving everything on either savings/time deposit, the purchasing power of the money is decreasing because inflation rate is higher than the interest rates you are getting from savings/time deposits.
Investors swamped yesterday’s auction for 10-year Treasury bonds (T-bonds) on the back of strong appetite for government debt papers.
Total tenders reached P31.414 billion, more than three times the planned debt sale of P9 billion. With strong demand, the government successfully sold P9 billion worth of the paper at a coupon rate of 4.875 percent.
This was lower than the rate of a similar paper of 5.42 percent or a decline of 54.5 basis points.
Deputy Treasurer Eduardo Mendiola, who chaired yesterday’s auction panel, said last week’s 25-basis points policy rate cut by the Bangko Sentral ng Pilipinas (BSP) convinced investors to park their funds in government debt papers.
Last week, the BSP reduced the overnight borrowing rate to a low of 3.75 percent and the lending rate to 5.75 percent on concerns over global growth risks.
Mendiola said the government’s announcement of a narrower-than-programmed budget deficit recorded in the first half of the year and the benign inflation environment also convinced investors to put their money in government securities.
According to the latest data from the Department of Finance (DOF), the government incurred a budget deficit of P11.696 billion in June, wider than the P7.691 billion posted a year ago.
The June budget gap brought the first half deficit to P34.482 billion, still way below the programmed ceiling of P109.341 billion for the period.
Inflation rate, meanwhile, dipped to 2.8 percent in June from 2.9 percent in May, according to the latest data from the National Statistics Office.
The June inflation brought year-to-date inflation at three percent, falling at the lower end of Philippine central bank’s three-to-five percent target for 2012.
The government hopes to raise P108 billion from the sale of T-bills and T-bonds in the third quarter of the year or slightly higher than the programmed domestic borrowing of P106.5 billion in the second quarter.
The government relies on local and foreign borrowing to fund its budget deficit, which is expected to hit roughly P279 billion this year. Last year, the budget gap hit P197.8 billion, lower than the original program of P300 billion set for 2011.
http://www.philstar.com/Article.aspx?publicationSubCategoryId=66&articleId=833278
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