T-bill rates may inch up as funds shift to RTBs

RATES of Treasury bills (T-bills) could inch higher this week as funds are expected to shift to the government’s ongoing retail bond offer.

The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, broken down into P5 billion each in 91-, 182- and 364-day debt papers.

A trader said the rates of the short-term securities could move sideways or end 5 basis points (bps) higher as investors will likely choose to park their excess funds in the government’s retail Treasury bond (RTB) offer, which offers a higher yield.

“While the Bangko Sentral ng Pilipinas held rates steady in their recent meeting, the Fed may consider faster tapering due to surging inflation and good economic data,” the trader said in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill yields could be slightly higher in line with a weekly increase in most short-term yields in the secondary market.

Short-term secondary market yields went up by 0.01 bp week on week, he said, “amid the ongoing RTB offering that could siphon off some of the excess liquidity in the financial system.”

The Treasury on Tuesday raised an initial P113.545 billion at its price-setting auction for its offer of 5.5-year RTBs. This was oversubscribed by more than five times versus the initial P30-billion offer. The RTBs had fetched a coupon rate of 4.625%.

National Treasurer Rosalia V. de Leon said the proceeds of the offering will fund the government budget. The RTB public offer will run until Nov. 26, unless closed earlier, and the bonds will be issued on Dec. 2.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) on Thursday kept benchmark rates unchanged, as expected by all 20 economists in a BusinessWorld poll held the previous week, saying an accommodative stance is key to economic growth that has gained solid traction.

The BSP left the key rate steady at 2%. It also kept the overnight deposit and lending rates at historic lows of 1.5% and 2.5%.

On the other hand, the US Federal Reserve recently announced the start of the reduction of its $120-billion monthly asset purchases at $15 billion per month. New York Federal Reserve Bank President John Williams on Thursday said inflation in the United States is becoming more broad-based and expectations for future price hikes are rising, a trend policy makers will be watching closely, Reuters reported.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.2171%, 1.4525% and 1.641%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The BTr raised P15 billion as planned via the T-bills it auctioned off last week as total tenders reached P37.99 billion, or more than double the initial offer but lower than the P42.52 billion in bids logged in the previous auction.

Broken down, the BTr raised P5 billion as planned via the 91-day debt papers from P11.34 billion in bids. The three-month T-bills fetched an average rate of 1.15%, up by 0.7 bp from the 1.143% seen at the previous week’s offering.

The BTr also borrowed the programmed P5 billion from the 182-day securities as bids reached P113.07 billion. The average rate of the six-month T-bills went up 1.2 bp to 1.413% from 1.401% a week earlier.

Lastly, the government made a full P5-billion award of the 364-day T-bills as the tenor attracted tenders worth P13.58 billion. The average yield on the one-year instruments stood at 1.621%, up by 0.5 bp from the 1.616% fetched the previous week.

The government previously planned to raise P200 billion from the domestic market in November: P60 billion via weekly T-bill auctions and P140 billion from weekly offers of Treasury bonds (T-bonds). However, the BTr canceled the auctions of P35 billion each in five-year and seven-year T-bonds on Nov. 16 and 23 to give way to its RTB offering.

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 with Reuters