YIELDS ON Treasury bills (T-bill) on offer this week will likely inch up as investors await the local inflation print as well as a possible rate hike from the US central bank.
The Bureau of the Treasury (BTr) is offering P15 billion worth of T-bills tomorrow. Broken down, the Treasury plans to raise P4 billion via the three-month papers, P5 billion through the six-month debt, and another P6 billion in one-year T-bills.
Traders interviewed last week said rates on the T-bills on offer on Monday will likely move sideways from the previous auction.
The Treasury fully awarded the T-bills it auctioned off last week, raising P15 billion as planned from total bids amounting to P35.7 billion.
At that auction, rates of the three-month, six-month and one-year papers rose to 3.218%, 4.07% and 4.879%, respectively.
At the secondary market on Friday, yields on the 91-day, 182-day and 364-day papers ended at 3.2137%, 4.0903% and 4.8648% respectively.
“[Rates on T-bills will likely move] sideways or five basis points (bps) higher from the previous auction as we are still expecting strong demand,” a trader said in a phone interview on Friday.
The trader added that today’s auction will likely be 1.5-2 times oversubscribed.
“So far, market players are still following the expectation of a rate hike in September by the US Federal Reserve. That’s going to be priced in the bids for the next auction,” the trader added in a mix of English and Filipino.
US consumer spending increased 0.4% in July, suggesting strong economic growth in the third quarter, Reuters reported.
The personal consumption expenditure price index, the Fed’s preferred inflation gauge, accelerated 2% year on year, sitting at the central bank’s inflation target.
Given strong domestic demand and tightening labor market, inflation could rise further, keeping the Fed on track to raise interest rates for a third time this month.
The bond trader added that investors are also watching out for local inflation data, with the August figure to be released on Tuesday.
Inflation likely accelerated to a fresh multiyear high in August due to higher food costs, according to a BusinessWorld poll, boosting the case for another rate hike this month.
The survey among 14 economists yielded a median estimate of 5.9% headline inflation rate in August, faster than the 5.7% in July as well the 2.6% in the same month last year.
“Another rate hike from the BSP (Bangko Sentral ng Pilipinas) is possible — that’s why inflation is very critical. We still see overheating of the economy with the very high inflation,” the trader said. “That’s going to be something we’re watching out for.”
The central bank will reassess its policy stance on Sept. 27, their sixth review this year. BSP Governor Nestor A. Espenilla, Jr. said the monetary authority has “kept the door open” for future tightening to dampen price pressures.
The Treasury is raising P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in Treasury bonds.
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. — Karl Angelo N. Vidal with Reuters

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