TREASURY bills (T-bill) on offer today will likely trade sideways following the central bank’s move to keep benchmark interest rates unchanged.

The Bureau of the Treasury (BTr) is looking to raise P20 billion via its T-bill offering on Monday, broken down into P8 billion in three-month papers, P6 billion in six-month securities, and another P6 billion in one-year notes.

A bond trader said the debt papers may trade sideways or inch up by around five basis points (bps).

Last Nov. 4, the Treasury made a partial award of the bills, raising only P9.8 billion out of the P20 billion program.

It rejected all bids for the 91-day papers even as it attracted P8.82 billion worth of investments. Had the Treasury made a full award of the papers, they would have fetched an average rate of 3.281%.

For the 182-day T-bills, the government raised just P3.8 billion out of total bids of P9.85 billion, as the securities fetched an average rate of 3.198%.

As for the one-year securities, the BTr awarded P6 billion as planned at an average rate of 3.513%.

In a phone message on Sunday, Robinsons Bank Corp. peso debt trader Kevin S. Palma said that after the Bangko Sentral ng Pilipinas (BSP) kept its monetary policy steady as widely expected, the market is now awaiting further news on the US-China trade talks.

“After the BSP kept its policy rates unchanged last week as expected, investors are currently on wait and see mode amid growing optimism about a US and China trade agreement,” Mr. Palma said.

On Thursday, the BSP Monetary Board decided to keep the benchmark interest rates for overnight reverse repurchase, as well as overnight deposit and lending at four percent, 3.5% and 4.5%, respectively. The regulator explained that the current rates are “appropriate” amid the weakening global economy, while sustained household spending acts as a cushion against external headwinds at home.

The move was widely expected after BSP Governor Benjamin E. Diokno hinted in separate television interviews that the central bank is “likely done” with rate cuts for the year.

So far this year, the BSP has cut rates by a total of 75 bps, partially dialling back the 175-bp hike it fired off last year in the face of successive multi-year-high inflation rates.

Reuters reported said that representatives from China and the United States made “constructive talks” on the first round of trade agreement over high-level phone call. The two representatives were China’s Vice Premier Liu He, U.S. trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

The two largest economies have been working on negotiations in an attempt to end the prolonged trade war. However, there are no clear details on the possible timeline of the deal yet.

Back home, Mr. Palma said that the auction should be met with strong demand as the bond maturities this week will flood the system with liquidity.

“Reinvestment requirements from a jumbo-bond maturity this week coupled with excess liquidity from RRR (reserve requirement ratio) cuts should keep the demand afloat for this auction,” he added.

The Treasury has set a P220 billion borrowing program this quarter for the local market, broken down into P100 billion in T-bills and P120 billion via Treasury bonds.

The government is planning to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga with report from Reuters

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