TREASURY BILLS (T-bills) on auction today are expected to fetch higher yields as the market continues to focus on the ongoing retail Treasury bonds (RTB) offering.

The Bureau of the Treasury is looking to raise P20 billion from the T-bills today, broken down into an P8-billion offering for three-month securities and P6 billion each for six-month and one-year debt papers.

Traders interviewed on Friday said they are expecting the debt papers to fetch higher yields, expecting an increase of 5-10 basis points (bps), as the market is still looking at the RTB offering, which started last week.

“[The yields] would be five to ten bps higher due to the recently issued five-year RTB so [it pushed] the yields higher since [it saw huge demand],” a trader said in a phone interview.

In the last T-bills auction on Nov. 16, the Treasury made a partial award of its offering, issuing just P18.5 billion out of the planned P20-billion borrowing even though it was met by P29.9-billion worth of demand as rates on the papers rose across the board, with the market seeing higher possibility of a US Federal Reserve interest rate hike next month.

Broken down, the Treasury fully awarded the 89-day papers after total bids reached P12.92 billion, higher than the P8 billion offered. The papers fetched an average rate of 2.148%, up by 19.1 bps from the 1.957% booked during the Oct. 23 auction.

The government also raised P6 billion worth of 180-day bills as planned at an average rate of 2.563%, 10.6 bps higher than the previous auction’s 2.457%. The debt papers were met with P10.87 billion worth of demand.

Lastly, the 362-day debt papers were partially awarded, with the government set to issue just P4.5 billion worth of the tenor against the P6.15 billion the banks sought to buy and the P6 billion up for grabs. The T-bills carried an average yield of 2.952%, higher by 9.9 bps than the 2.853% rate at the last auction.

At the secondary market on Friday, the three-month, six-month and one-year papers fetched yields of 3.0189%, 2.9648% and 3.4136%, respectively.

Meanwhile, the government’s rate-setting RTB auction last Nov. 20 was met with bids totalling P191.8 billion, prompting the government to expand its award to P130 billion from its planned issuance of just P30 billion.

The offer period for the retail bonds runs until Nov. 29, while the issue date will be on Dec. 4.

Another trader noted that the 91-day debt papers are likely to be twice oversubscribed at today’s auction.

Meanwhile, traders said that they will not be surprised if the Treasury rejects some bids today “as they have already met their [fund-raising] goal” following the RTB issuance.

“If [they can see a huge] volume, they have the option to reject [some bids],” a trader said.

The government borrows from both local and external sources to tap market liquidity in order to finance its budget deficit capped at 3% of gross domestic product, or about P482.1 billion.

This year, the government has set a P727.64-billion borrowing plan, 80% of which or P582.11 billion will be sourced from local lenders through T-bills and Treasury bonds. The P145.53-billion balance, meanwhile, will be borrowed from external creditors. — KANV

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