This would discourage lenders.
HSBC made this warning concerning the record low interest rates on treasury bills in the Philippines.
“I doubt that people are going to want to lend at this level, they will use a different basis to lend,” said Jose Arnulfo “Wick” Veloso, HSBC treasurer and capital markets head, who is also the incoming chief executive officer of the bank in the Philippines.
“The expansion of money may not necessarily mean that because of the low rate people will be encouraged. Borrowers may be encouraged to borrow, but the lenders will not, they will use a different measure,” he added.
This in turn will negatively impact the country’s economy.
At Monday’s government auction, the rate for the 91-day paper dropped to 0.15 percent, 0.45 percent for the 182-day IOUs, and 0.68 percent for the 364-day securities.
Those figures fell below the previous record-low rates which were at 0.438 percent for the three-month paper, 0.682 percent for the six-month IOUs, and 0.944 percent for the one-year securities, all registered during the September 5 auction last year.
He added that the significant decline in interest rates would be attributable to very strong foreign exchange inflows into the country.
With the record low interest rates, Veloso believed that the Bangko Sentral ng Pilipinas and the national government would need to review their policies and come up with something positive for the market. “
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