TREASURY BILLS (T-bills) on offer today will likely fetch lower rates on the back of strong demand for papers in the short end of the curve amid excess liquidity in the market.
The Bureau of the Treasury is offering P15 billion worth of T-bills at its auction today.
Broken down, the Treasury plans to raise P4 billion via the three-month papers, P5 billion though the six-month securities and P6 billion from the one-year T-bills.
On Friday, traders said yields on the T-bills on auction today are expected to decline, with one saying rates could drop across the board.
“Most likely rates on the T-bills will go lower by five basis points (bp) across the board from the previous auction,” the trader said in a phone interview.
The trader added that rates on the short-termed debt will likely decrease due to “continued strong demand on the short end.”
The government made a full award of the T-bills it offered on Aug. 13, borrowing P15 billion as planned against total tenders amounting to P49.4 billion, the highest bid-to-cover ratio this year.
Yields on the three-month, six-month and one-year securities declined to 3.244%, 4.117% and 4.892%, respectively.
At the secondary market on Friday, the rates of the 91-day, 182-day and 364-day papers closed at 3.1574%, 4.0894 and 4.8384%, respectively.
The trader expects the T-bills on offer to be twice oversubscribed as investors await a pickup in yields.
“It might be oversubscribed by at least twice since clients are waiting to have some yield pickup. That’s why the demand for T-bills is getting stronger.”
Last week, National Treasurer Rosalia V. De Leon said the Treasury saw good demand from investors following a 50-bp rate hike by the Bangko Sentral ng Pilipinas.
The central bank raised policy rates by 50 bps at its meeting on Aug. 9. Rates now stand at 4.5% for the overnight lending rate, 4% for the overnight reverse repurchase rate, and 3.5% for the overnight deposit rate.
Meanwhile, another trader also expects a higher bid-to-cover ratio at today’s auction.
“The rates can go lower because of the demand as it is from before. The market is very liquid — awash with cash and nowhere to place,” the trader said on Friday.
“[With the prospect] of higher yields, they would like to park it for some time only.” — K.A.N. Vidal

RELATED ARTICLESMORE FROM AUTHOR