Strong demand seen for T-bills
By Melissa Luz T. Lopez,
Senior Reporter
TREASURY BILLS (T-bills) on offer today are likely to see strong demand, with yields expect to move slightly higher amid hawkish bets for another rate hike in the United States.
The government is looking to raise P15 billion this week, broken down into a P6-billion offering for three-month, P5 billion under the six-month tenor, and P4 billion for one-year debt papers.
Traders interviewed late last week said they expect strong appetite from market players, as the preference is now geared towards short-term instruments ahead of expectations the US Federal Reserve will raise policy rates by another 25 basis points (bps) by December.
One trader said yields on the T-bills could move higher by at least five to 10bps, tracking the upward move of US Treasury notes seen the past week.
The Oct. 9 auction saw yields drop from two weeks ago, with the 91-day papers fetching a 1.958% average rate, 2.457% for the 182-day term, and 2.82% for the 364-day tenor.
The one-year notes were quoted slightly higher at 2.8511% at the secondary market as of Friday afternoon, while the shorter papers stood at 2.4375% for the 91-day and 2.7589% for the 182-day tenor.
“The probability of a Fed rate hike in December is around 80%, and this is pointing to higher yields,” the trader said in a phone interview, noting that US interest rates recently received a boost from the passage of President Donald J. Trump’s tax reform plan by the Senate.
He added the weaker peso would also drive local yields up. Thursday saw the currency hit a fresh 11-year low at P51.53 versus the dollar, the weakest showing since a P51.60 finish logged on Aug. 24, 2006.
Another trader added that yields could stay flat as investors await for leads regarding Mr. Trump’s choice as Fed chair, with incumbent chief Janet L. Yellen’s term expiring in February.
“Supposedly by Nov. 3, Trump will be announcing the next Fed chair. There is speculation that he might appoint someone hawkish for the seat, so that will push yields higher,” the trader said.
Reuters reported Mr. Trump is considering a fresh term for Ms. Yellen, but the President is also eyeing Fed Governor Jerome Powell, ex-Fed Governor Kevin Warsh, and Mr. Trump’s top economic adviser Gary Cohn for the top post.
Both traders expect strong demand for Monday’s auction, saying bids could hit twice or three times the P15 billion offered by the Bureau of the Treasury as players lean towards short positions amid uncertainty in the global financial markets.
The government plans to raise up to P150 billion from domestic sources this quarter, lower than the P195 billion programmed between July-September and forming part of the P727.64-billion borrowing plan for the entire year.
