Treasury bill rates to climb as liquidity shifts to retail bonds

RATES of Treasury bills (T-bills) may go up this week as the government’s ongoing retail bond offer continues to siphon off market liquidity.

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

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said T-bill rates could inch up as market liquidity is expected to continue to shift to the ongoing retail Treasury bond (RTB) offering.

“The ongoing RTB offering to fundamentally add to the supply of government securities in the market, thereby leading to lower prices and higher yields, some fund shifts to RTBs from other existing securities,” he said in a Viber message.

T-bill rates could also go up due to the Bangko Sentral ng Pilipinas’ (BSP) higher inflation estimates for 2022 and 2023, he added.

A trader in a Viber message said T-bill rates are expected to rise by 5 to 10 basis points (bps) as market liquidity is invested in the retail bonds.

The government last week raised an initial P120.764 billion at its rate-setting auction for its offer of five-year RTBs as tenders reached P183.44 billion, or more than six times the P30-billion plan. The retail bonds fetched a coupon rate of 4.875%.

The offer period for the peso-denominated debt will run from Feb. 15 to 28. There will also be a swap offer for bonds falling due on March 14 and July 4.

Meanwhile, the BSP raised its inflation forecast for 2022 to 3.7% from 3.4% previously, and hiked its 2023 estimate to 3.3% from 3.2%.

Inflation risks include pork and fish supply shortages, along with the effect of higher oil prices on transport fares, the central bank said.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 0.8118%, 1.0631%, and 1.5003%, 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 P41.23 billion, or close to three times the initial offer.

Broken down, the Treasury bureau raised P5 billion as planned via the 91-day securities from P13.57 billion in bids. The three-month debt papers fetched an average rate of 0.81%, rising by 10 bps from the 0.71% seen the previous week.

The BTr also borrowed the programmed P5 billion from the 182-day securities it offered on Monday from P14.79 billion in tenders. The average rate of the six-month T-bills rose by 4.4 bps to 1.066% from 1.022% previously.

Lastly, the government made a full P5-billion award of the 364-day debt papers as bids reached P12.874 billion. The average yield on the one-year instrument stood at 1.475%, up by 6.7 bps from 1.408% a week earlier.

Before it canceled the remaining two 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. — J.P. Ibañez