TREASURY BILLS (T-bills) on offer on Monday will likely fetch lower rates on the back of strong liquidity and market expectations of another policy rate cut by the central bank amid a sluggish growth outlook.

The Bureau of the Treasury (BTr) wants to raise P30 billion via the T-bills today, broken down into P6 billion each for 91- and 182-day papers and P8 billion for the 364-day securities.

Two bond traders interviewed on Friday said they expect T-bill rates to continue to decline by around five to 10 basis points (bps).

“I think average yields will decrease by at least five bps from the last T-bills auction due to strong demand for short-term securities and concerns of economic slowdown due to the coronavirus. The BSP (Bangko Sentral ng Pilipinas) might also cut rates next quarter,” the first trader said in a Viber message

Last week, the government awarded P6 billion via the 91-day papers as planned at an average rate of 3.072%, down by 4.3 bps from the 3.115% quoted in the auction on Feb. 10.

The Treasury raised another P6 billion as programmed via the 182-day papers from total tenders amounting to P20.792 billion. The three-month papers yielded an average rate of 3.42%, which was 4.1 bps lower than the previous yield of 3.461%.

For the 364-day T-bills, the government accepted P8 billion as planned at an average rate of 3.836%, also lower by 7.2 bps from the 3.908% fetched previously.

For the second bond trader, T-bill rates may decline by 10 bps versus the yields fetched in the previous auction as the growth outlook for the first quarter dims on easing economic activity amid the coronavirus disease 2019 (COVID-19) outbreak.

“Less economic activity may affect growth in general, so in turn, might give leeway for BSP to cut rates again, that’s how the market (perceives it) right now,” the trader said by phone on Friday.

Earlier this month, BSP Governor Benjamin E. Diokno said another 25-bp rate cut is possible as early as the second quarter to cushion the impact of the virus outbreak on the economy. This follows the 25-bp cut announced at the BSP Monetary Board’s Feb. 6 policy meeting.

The National Economic and Development Authority (NEDA) has said the economy could lose 0.3% if the virus lasts until June, and further rise to 0.7% of gross domestic product (GDP) if it lingers until yearend.

S&P Global Ratings last week cut its growth outlook for the country to 6.1% for 2020 from the already downgraded 6.2% projection. Moody’s Investors’ Service also lowered its own estimate to 6.1% from the 6.2% it gave previously.

Both projections were below the government’s GDP growth target range of 6.5-7.5% for this year.

S&P sees the country to be among the countries to be the “least affected” by the outbreak, while Moody’s expects the country’s growth to take a hit from slower expansion seen in its Asian peers in the wake of the outbreak.

“That’s why people will continue to buy [securities]. Again, because of COVID-19, lower CPI (consumer price index) forecast, because of low demand from transportation [and] no bloated prices [of goods]. Also, we still have so much liquidity in the system so that’s pushing (T-bill) prices lower in general,” the second trader added.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via Treasury bonds.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — B.M. Laforga

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