A study of the correlation of interbank call loan rate and interest rates of selected short-term instruments

• Main Authors: Chenco, Marie Lyn, Filipino, Jacqueline, Lim, Jacqueline, Noche, Geminiano
• Format: text
• Language: English
• Published: Animo Repository 1997
• Subjects: Interest rates; Loans; Banks and banking, Central; Treasury bills; Promissory notes
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/16483
• Institution: De La Salle University

The paper examines the relationship between the interbank call loan rate and the interest rates of the following selected short-term instruments: 30 to 45-day time deposit, 91-day Treasury bill, commercial paper and promissory note and the degree of relationship between them. With the use of multiple regression, it was found out that the interbank call loan rate is significantly correlated in the positive manner to all the selected short-term instruments. However, the degree of relationship among them varies: (1) in the 30 to 45-day time deposit rate, for every 0.598090 unit change of interbank call loan rate, there is a corresponding 1 change in the 30 to 45-day time deposit rate (2) in the 90-day Treasury bill rate, for every 0.817901 unit change of interbank call loan rate, there is a corresponding change in the 90-day Treasury bill rate (3) in the commercial paper rate, for every 0.960300 unit change of interbank call loan rate, there is a corresponding change in the commercial paper rate and (4) in the promissory note rate, for every 0.1403808 unit change of interbank call loan rate, there is a corresponding change in the promissory note rate. The result of this study confirms that interbank call loan rate can be used as one of the indicators for the rates of the following short-term instruments: 30 to 45-day time deposit, 91-day Treasury bill, commercial paper and promissory note. Knowing the degree of relationship the interbank call loan rate has on these selected short-term instruments, investors can now weigh the degree of relationship between them and the attractiveness of the selected short-term instruments that will most enhance their investment portfolio. Overall, this study would serve as a framework for the finance industry by providing a theoretical support between the degree of relationship of interbank call loan rates and the selected short-term instruments' interest rates.