RATES of Treasury bills may move sideways with an upward bias in Monday’s auction ahead of the start of the government’s retail bond offer.

The Bureau of the Treasury (BTr) plans to raise P15 billion via the Treasury bills (T-bills) it will auction off on Monday, or P5 billion each from 91-, 182- and 364-day debt papers.

“Yields of T-bills will continue to move sideways with a basis point (bp) upward bias across tenors. Dealers and investors will now gear up for the government’s 26th retail Treasury bond (RTB) offering where efforts and bulk of the demand will be concentrated in the said offering,” a bond trader said in a Viber message.

“We may see the coupon for the 5.5-year RTB be set to an indicative range of 4.500% to 4.750%.”

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill yields could be slightly higher following the higher rates fetched for the central bank’s 28-day bills on Friday amid inflation concerns.

“Continued excess liquidity in the financial system would also temper any uptick in T-bill auction yields,” he said. “The upcoming RTB offering could take some of the excess liquidity in the financial system and could add to supply of government securities.”

He said the RTB’s coupon could be around the 4% level, close to the latest five- and six-year secondary market yields.

The BTr will offer 5.5-year RTBs to raise at least P30 billion ($603 million), with a swap offer for bonds falling due in 2022, it said on Friday.

The bond offer will be launched on Nov. 16 and follows the government’s first onshore retail dollar bond issue that raised $1.6 billion in September, helping boost funding for government programs to support the economy’s recovery.

The offer period is set to run from Nov. 16 to Nov. 26, unless the BTr closes it early. The papers will be issued on Dec. 2 and will mature by 2027.

The BTr will suspend the auction of five-year and seven-year Treasury bonds on Nov. 16 and 23 to give way for the offering.

With minimum investments for RTBs at P5,000, the Treasury is targeting small investors that want low-risk, higher-yielding savings instruments backed by the National Government.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.2133%, 1.4391% and 1.6575%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the five- and seven-year T-bonds were quoted at 4.1571% and 4.6372%, respectively.

The BTr raised P15 billion as planned via the T-bills it auctioned off on Tuesday as the offer attracted P42.52 billion, almost triple the initial offer and higher than the P41.78 billion in bids logged in the previous auction.

Broken down, the BTr raised P5 billion as planned via the 91-day debt papers from P14.53 billion in bids. The three-month T-bills fetched an average rate of 1.143%, up by 1.3 bps from the 1.13% seen at the previous offering.

The BTr also borrowed P5 billion as programmed from the 182-day securities as tenders reached P15.26 billion. The average yield of the six-month debt paper rose 0.6 bp to 1.401% from 1.395% fetched a week earlier.

Lastly, the government made a full P5-billion award of the 364-day T-bills as the tenor attracted bids worth P12.73 billion. The average rate of the one-year instrument stood at 1.616%, up by 0.3 bp from the 1.613% a previously.

The BTr plans to raise P200 billion from the domestic market in November, or P60 billion via weekly offers of T-bills and P140 billion from weekly T-bond auctions.

The government wants to borrow P3 trillion from local and external sources this year to help fund a budget deficit seen to hit 9.3% of the country’s gross domestic product. — Jenina P. Ibañez