YIELDS ON Treasury bills (T-bills) on offer on Monday, April 6, will likely climb anew as investors prefer cash amid uncertainties, with the government still expected to turn down “unreasonably high” bids.

The Bureau of the Treasury (BTr) is set to raise P20 billion in T-bills at Monday’s auction, broken down into P10 billion for 91-day papers and P5 billion each for 182- and 364-day securities. 

Carlyn Therese X. Dulay, Security Bank Corp. first vice-president and head of Institutional Sales, said yields on the three-month papers could settle within 3.25-3.375%, while the six-month T-bills could see its rate end between 3.5-3.625%. Meanwhile, the rate of the one-year securities may fall within 3.75-4%.

“Should the bids be too far from market, however, expect the BTr to reject bids in full, as they did for the last four auctions,” Ms. Dulay said via e-mail on Friday.

The BTr rejected all P29.617 billion in bids during its 35-day T-bill auction last week against the plan to raise P15 billion, its fourth consecutive time to not award securities, due to higher rates.

Likewise, it did not accept the P14.5 billion in bids put up for its P20-billion offer of 91-, 182- and 364-day T-bills last week. 

Had it made a full award, the average rate for the 91-day papers would have spiked 149.3 basis points (bps) to 4.517% from the 3.024% fetched  during the March 16 auction.

The 182-day T-bills would have fetched an average rate of 4.259%, up 86.1 bps if all P4.06 billion were accepted, while the 364-day T-bills would have yielded an average rate of 4.402%, up 85 bps if it awarded P5 billion as planned.

Yields on the 91-, 182- and 364-day papers ended at 3.306%, 3.459% and 3.745% at the secondary market on Friday, according to the PHP Bloomberg Valuation Service Reference Rates.

A bond trader said they expect rates to be higher should the Treasury accept bids or make a full award as investors continue to opt for cash, “evidenced by banks paying higher interest rates for deposits.”

“While I think bids will be rejected again, there is some chance that there will be partial awards as the cut in the reserve requirements was effective on April 3,” the trader said in a Viber message over the weekend. 

However, the trader said the BTr does not seem pressured to accept “unreasonably high yields” as it has a “strong cash position.”

“[We] expect moderate demand to come in for the T-bill auction [this] week given the renewed buying for Peso GS (government securities), but end clients and market participants are keen to take positions on short-dated securities only at attractive rates,” Security Bank’s Ms. Dulay said. 

Around P180-200 billion in fresh cash was infused into the financial system after the 200-bp cut in universal and commercial banks’ reserve requirement ratio (RRR) took effect on Friday, which brought it down to 12%.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno has been authorized by the Monetary Board to cut banks’ RRR by a total of 400 bps this year. The central bank had said reductions in the reserve ratios of other banks and nonbank financial institutions are also being studied. 

The Treasury has set a P190-billion local borrowing program for April, broken down into P130 billion in T-bills and P60 billion in Treasury bonds.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is capped at 3.2% of gross domestic product. — Beatrice M. Laforga

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