RATES OF Treasury bills (T-bills) on offer this week will likely ease further on robust liquidity as investors put their idle funds to work via the short-term government papers.

The Bureau of the Treasury (BTr) on Monday will auction off P20 billion in T-bills, broken down into P5 billion each for 91- and 182-day papers and P10 billion worth of 364-day securities.

On Tuesday, the BTr will offer P15 billion in 35-day T-bills.

For Noel S. Reyes, first vice-president and chief investment officer of the Asset Management Group at Security Bank Corp., yields on the short-term papers will continue to decline as investors still prefer investing in this part of the curve.

“Expect short end rates to continue to trend lower as the curve steepens and investors shift to this part of the curve. The long end maturities have had a decent run and should warrant profit taking. Hence, this flow will see a shift to the shorter dates,” Mr. Reyes said in a text message on Saturday.

Particularly, rates for the T-bills could drop by as much as 20-30 basis points (bps) from the yields fetched in the previous auction while rates for the 35-day papers could range within 2.2-2.3%, according to Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp.

Last week, the BTr upsized the volume of T-bills it awarded to P22 billion from the programmed P20 billion as rates dropped across-the-board and bids soared to P87.187 billion.

It fully awarded P5 billion in three-month papers at an average rate of 2.269%, 21 bps lower than the 2.479% rate the week prior.

The Treasury also raised P7 billion in six-month T-bills as rates declined to 2.374%, while it made a full award of the programmed P10 billion via the one-year securities at an average yield of 2.761%.

At the secondary market, yields on the short-term papers stood at 2.271%, 2.405%, 2.454% and 2.733% for 35-, 91- 182 and 364-day T-bills, respectively on Friday, based on PHP Bloomberg Valuation Service Reference Rates.

For this week, Mr. Ricafort said the auctions will be met with strong demand which will pull down rates further as investors put their excess funds in safe-haven assets.

He said investors are taking a “more conservative stance” during the community quarantine period and are opting to hold on to cash due to reduced business and spending activities.

“Easing inflation at 2.2% in April 2020 and economic contraction of -0.2% in 1Q 2020 fundamentally supported easing local interest rate benchmarks (PHP BVAL yields), despite recent signals from BSP (Bangko Sentral ng Pilipinas) Governor [Benjamin E.] Diokno about a possible pause in monetary easing at the moment,” he said via Viber over the weekend.

“On other external factors, increased tensions recently between the US and China that could further weigh on the global economy (on top of economic contraction with risk of recession largely due to COVID-19 lockdowns) could have also supported the recent easing trend in interest rate benchmarks in the US and locally,” Mr. Ricafort added.

Meanwhile, the BTr announced in an advisory that the first and second rewards draw for the Premyo bonds will push through on June 18 after a series of postponements during the lockdown.

The government is planning to borrow P170 billion from the local market this month: P110 billion via its weekly T-bill auctions and the remaining P60 billion via Treasury bonds to be offered fortnightly. — Beatrice M. Laforga

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