MANILA, Philippines—National Treasurer Rosalia de Leon on Wednesday said the higher interest rates on peso-denominated government securities was an “overreaction” of the market to the US Federal Reserve’s tapering mode.
National Treasurer Rosalia de Leon: Overreaction. INQUIRER FILE PHOTO
She said efforts of market players to substantially push yields were unreasonable given the “strong” macroeconomic fundamentals and “healthy” fiscal situation of the Philippines.
“There is no reason to push for a rapid increase in interest rates,” De Leon pointed out.
The national treasurer said the tapering by the US Fed has been overused as an excuse to seek higher yields from government securities.
De Leon was reacting to the recent uptrend in interest rates, which last year fell to historic lows. Treasury bills rates plummeted to historic lows below one percent in 2013.
In the latest auctions for treasury bills and bonds conducted by the Bureau of the Treasury earlier this month, banks sought higher yields. For instance, the yield for the 91-day bills rose by 69.2 basis points to 0.693 percent, while the rate for the three-year bonds inched up by 34.5 basis points to 2.399 percent. If not for the Treasury’s move to reject some bids, the rates could have risen by higher margins.
De Leon said that in the next monthly auctions for government securities, the Treasury could allow rates to go up but only within a reasonable margin. Any bids seeking yields much higher than secondary market rates would have to be rejected, she stressed.
The US Fed earlier announced that starting January, the amount of its monthly bond purchases would be cut to $75 billion from $85 billion following observations of an improving US economy. There is speculation that the Fed would continue to ease its stimulus program throughout 2014.
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