TREASURY BILLS (T-bills) on offer today may receive mixed bids from sentiment-driven market players amid geopolitical tensions between the United States and North Korea and on the back of a weaker currency versus the dollar.

The government plans to raise as much as P15 billion via T-bills at today’s auction: P6 billion in 91-day debt papers, P5 billion in 182-day notes and P4 billion in 364-day papers.

One bond trader said rates requested by banks are expected to move sideways to downward across the board compared to the previous auction on the back of demand for the papers amid risk-off sentiment among investors.

“Yields for the auction [today], we are seeing slightly lower than the last auction, even five to 10 basis points (bps) lower is possible across the board as core attention of everyone right now is tension between North Korea and US,” the trader said by phone on Friday.

Last week, US President Donald J. Trump had threatened North Korea with “fire and fury” after Pyongyang announced it is making plans to target Guam with nuclear missiles, which suggested a flight path over US ally Japan.

Meanwhile, Reuters reported North Korean state news agency KCNA had said the North Korean army would finish plans by Mid-August on firing four intermediate-range missiles over Japan, which will land in the sea 18 to 25 miles or 30 to 40 kilometers from Guam.

Mr. Trump issued another warning to North Korea on Friday with a reference to American weapons as being “locked and loaded.”

“Military solutions are now fully in place, locked and loaded, should North Korea act unwisely. Hopefully Kim Jong Un will find another path!” Mr. Trump wrote on Twitter, a day after his defense secretary said the United States was ready to counter any threat from Pyongyang.

“So with this, people will be on a risk-off now, which will result to strong demand for the T-bills. We’re expecting demand to be maybe twice on the 91- and 182-days also, but for the one year, maybe not as much, probably matching the offer or not more than the offer,” the trader said.

The government raised P15 billion as planned during its last offering of T-bills last July 31 amid strong market appetite for shorter-tenored papers, with total tenders reaching P31.9 billion, more than twice the offer size.

The 91-day T-bills received a total of P15.801 billion in tenders, more than double the programmed P6 billion, with the government fully awarding the papers that were quoted at an average rate of 2.176%. Similarly, the government raised P5 billion as planned from the 182-day securities after banks wanted to buy as much as P7.94 billion. The papers fetched a 2.529% yield.

Lastly, the Treasury bureau also fully awarded the 364-day T-bills after total demand reached P9.178 billion, double the P4 billion offer size. The securities were quoted at 2.97%.

At the secondary market on Friday, the three-month, six-month, and one-year papers fetched 2.1953%, 3.0032%, and 3.0721%, respectively.

In contrast, another trader said: “Indication is yields will be five to 10 bps higher across the board versus the previous auction on the back of weaker peso.”

On Friday, the peso closed at P50.98 versus the greenback due to tensions between US and North Korea. This was its weakest finish in almost 11 years or since it ended at P51.05 against the dollar on Aug. 29, 2006.

The local unit also breached the P51-to-the-dollar level intraday last Friday.

“Mostly that’s the only factor because overall, yields on US Treasuries are lower…so market players will likely stay defensive in this auction,” the trader noted.

All papers may be 1.5 times oversubscribed, the trader said.

The government plans to borrow as much as P195 billion from domestic sources this quarter — through offerings of P105 billion worth of T-bills and P90 billion in Treasury bonds — more than the P180 billion programmed in the second quarter.

It raised P154.82 billion from its sale of securities last quarter, below its original plan to borrow up to P180 billion. Broken down, P90 billion were from T-bills and P64.82 billion from T-bonds. The program capped offers of both papers at P90 billion apiece. — Janine Marie D. Soliman with Reuters

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