TREASURY BILLS (T-bill) on offer this week will likely fetch higher rates anew as market players are still pricing in the September inflation print.
The Bureau of the Treasury (BTr) is offering P15 billion worth of T-bills at its auction today. Broken down, the government is looking to raise P4 billion and P5 billion via three- and six-month papers, respectively, and P6 billion from the one-year debt papers.
Traders interviewed over the weekend said yields on the T-bills will likely climb further from the previous offer.
The bond traders expect rates of the debt papers to climb by 10-20 basis points (bp) across all tenors from the previous auction, with one saying the offer could be just 1.25 times oversubscribed.
“Investors are still looking at the inflation as well as the possible rate hike from the BSP (Bangko Sentral ng Pilipinas),” the trader said in a phone interview before the weekend, also noting the weakening of the peso versus the dollar as another downside.
Last week, the government decided on a partial award of the T-bills it placed on the auction block, raising just P13.548 billion out of the P15 billion it wanted to borrow.
Broken down, the BTr partially awarded the 182-day T-bills, accepting offers totalling P3.548 billion versus the P5-billion program.
Meanwhile, the Treasury fully awarded the 91- and 364-day papers, raising P4 billion and P6 billion from each tenor, respectively.
The three- and six-month debt fetched 4.404% and 5.684%, respectively, while the one-year T-bills yielded 5.883%.
At the secondary market on Friday, the 91-, 182- and 364-day papers were quoted at 4.4397%, 5.5924% and 5.998%, respectively.
Inflation picked up to 6.7% in September from the 6.4% print in August and 3% in the same month last year, as typhoon Ompong (international name: Mangkhut) worsened supply issues for rice and other crops.
However, the September result fell below the 6.8% estimate by the BSP and median in a BusinessWorld poll.
The market is still pricing in inflation expectations in their decisions, saying the BSP may still need to hike interest rates further to keep local yields competitive and quell price expectations.
The central bank will hold its seventh rate-setting meeting on Nov. 15. It has raised key rates by a cumulative 150 bps since May.
The Treasury is raising P270 billion from the domestic market this year through auctions of securities, offering P180 billion in T-bills and another P90 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

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