Treasury bill rates may go up ahead of retail bond offering

RATES of Treasury bills (T-bills) could increase this week as the government’s upcoming retail bond offer is expected to reduce liquidity in the market.

The Bureau of the Treasury (BTr) will offer P15 billion in Treasury bills (T-bills) on Monday, or P5 billion each in 91-, 182- and 364-day securities.

The BTr canceled the auctions for seven- and 10-year papers on Feb. 15 and 22 to make way for its sale of five-year retail Treasury bonds (RTBs).

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the T-bill yields this week will either be steady or slightly higher on expectations of reduced demand as the RTB offering will siphon off some liquidity from the market.

This is also in line with the week-on-week increase in most yields in the secondary market, he said in a Viber message.

“T-bills will likely move higher by 5-10 basis points (bps) for 91-days, and around 5 bps for 182- and 364-day bills,” a trader said in a Viber message.

The BTr will sell at least P30 billion in five-year RTBs this month, its first retail bond offer this year. The offer period for the peso-denominated debt is Feb. 15 to 28. There will also be a swap offer for bonds falling due on March 14 and July 4.

In November, the government raised P360 billion from five-year RTBs with a coupon rate of 4.625%.

Retail bonds are targeted for small investors who want low-risk, higher-yielding savings instruments backed by the government.

Mr. Ricafort said the RTB’s coupon could be at 4.3% to 4.5%, while the trader gave a forecast range of 4.75% to 5%.

Another trader in a Viber message said bets on rate hikes from the US Federal Reserve following high January inflation could also affect yield movement this week.

“We are watchful of US Federal Reserve as some market analysts are floating the possibility of an emergency rate hike, though right now it is not being priced in.”

Fed officials have been providing forward guidance about a possible rate hike by March, and quicker inflation bolsters the case for policy tightening.

The US consumer price index increased 7.5% year on year in January, the quickest in four decades. It was faster than the 7.3% median estimate in a Reuters poll and the 7% in December.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 0.7726%, 1.058%, and 1.4553%, respectively, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The government made a full award of P15 billion as planned via the T-bills it auctioned off last week as total tenders reached P53.75 billion.

Broken down, the Treasury bureau raised P5 billion as planned via the 91-day securities from P14.73 billion in bids. The three-month debt papers fetched an average rate of 0.71%, up by 1.9 bps from the 0.691% seen the previous week.

The BTr also borrowed P5 billion as planned from the 182-day securities it offered on Monday from P21.46 billion in tenders. The average rate of the six-month T-bills slipped by 0.1 bp to 1.022% from 1.023% previously.

Lastly, the government made a full P5-billion award of the 364-day debt papers as bids reached P17.56 billion. The average yield on the one-year instrument stood at 1.408%, the same rate seen a week earlier.

Before it canceled the remaining two T-bond auctions for February, the BTr had planned to raise P200 billion from the domestic market this month, or P60 billion via T-bills and P140 billion from Treasury bonds.

The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibañez