YIELDS on Treasury bills (T-bills) on offer today are likely to move sideways as investors are expected to park their funds in the fresh retail Treasury bonds (RTB) awarded last week amid additional liquidity.
The Bureau of the Treasury (BTr) is offering P15 billion worth of T-bills at its auction today. Broken down, the Treasury will raise P5 billion and P4 billion via three- and six-month papers, respectively, and another P6 billion from the one-year debt papers.
A trader said on Friday that yields on the securities on offer will likely “move sideways across tenors” by around five basis points.
“The yields will likely move sideways due to the latest issuance of retail Treasury bonds,” the first trader explained. “Other clients may possibly park their funds into the RTBs which relatively carry a higher rate.”
Meanwhile, another trader said the T-bills to be auctioned off today will “fetch lower yields by around 10 basis points, still due to demand.”
Last Monday, the BTr fully awarded the 91-, 182- and 364-day papers, with total tenders reaching P37.9 billion, more than double the P15 billion the government intended to raise.
The average rate on the 91-day T-bills declined by 13.7 basis points to 3.3% from the 3.437% logged in the previous auction, while the yield on the 182-day papers also dropped by 17.9 basis points to 3.7%. The 364-day securities also fetched a lower average rate of 4.198% versus the 4.297% in the previous auction.
At the secondary market on Friday, the three- and six-month bills were quoted at 3.7607% and 3.637% respectively, while the one-year debt papers fetched 4.1179%.
On the other hand, the Treasury also raised P66 billion in three-year retail bonds last Wednesday against total tenders of P92.8 billion from banks and other financial institutions, with a 4.875% coupon.
The RTBs are now being offered to the general investing public through banks for minimum denominations of P5,000 until June 8. The bonds, which will be issued on June 13, will mature in 2021.
Due to the RTB offering, the Treasury opted to cancel the scheduled Tuesday auction for the seven-year Treasury bonds.
The first trader said the additional money supply in the system may spell additional demand for the T-bills on offer today and result in an oversubscription by “1.5 times,” which would consequently drive yields downward.
The central bank’s reserve requirement ratio cut took effect last Friday, bringing down the rate imposed on universal and commercial banks by a percentage point to 18%.
The move is expected to unleash at least P90 billion worth of idle funds into the system.
The additional liquidity was also supported by the P130 billion worth of maturities of previously issued government bonds redeemed last May 23.
The Treasury is holding two auctions per week this quarter — one for T-bills and another for Treasury bonds — to reflect increased borrowing requirements.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — K.A.N. Vidal

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