THE STEADY DROP in yields of Treasury bills (T-bills) is expected to ease this week as market participants gear up for the upcoming retail Treasury bond (RTBs) sale.

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

However, it canceled the scheduled auction for 35-day papers on Tuesday to give way for the RTB offering on Thursday.

Traders said rates for the T-bills on offer today will continue to decline but only marginally or around 5 to 10 basis points (bps) lower against last week’s rates.

“I think yields for the T-bills will move sideways to downward by 5 bps. It seems like downward momentum for the T-bills has slowed down since there’s also the RTB issuance coming up soon that traders are considering when it comes to purchasing T-bills,” the first trader said via Viber.

Robinsons Bank Corp. peso sovereign debt trader Kevin S. Palma said strong demand for government securities will persist this week “as dealers and investors alike continue to hunt for yields to put their excess liquidity to work.”

Last week, the BTr awarded P24 billion in T-bills versus the programmed P20 billion as total bids hit P117 billion.

Broken down, it raised P7 billion each in three-month and six-month debt papers — more than the P5-billion programmed for each tenor — and accepted P10 billion as planned in one-year securities.

Yields dropped across-the-board from the previous auction, with the 91-, 182- and 364-day papers fetching average rates of 1.649%, 1.75% and 1.855%, respectively.

Meanwhile, the first trader said the coupon of the five-year retail Treasury bonds (RTBs) could range between 2.375% and 2.625%, while a second trader said it might settle within a lower range of 2.25%-2.5%.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills were quoted at 1.695%, 1.735%, and 1.879%, respectively while the five-year Treasury bonds fetched 2.363%, based on the PHP Bloomberg Valuation Service Reference Rates.

The BTr will hold the rate-setting auction for the five-year retail Treasury bonds on Thursday, July 16, for an initial P30-billion offer.

Both traders said the RTB offer will likely be met with strong demand as the market remains flush with cash.

“The upcoming RTB has all the caliber to be a jumbo bond issuance. The timing is just right with the elevated liquidity and the relatively low yield backdrop while we all combat and try to rebound from this pandemic,” Mr. Palma said.

The upcoming retail bond issue will be the government’s second offer for the year and 24th overall, following its offer of three-year RTBs in February where it raised a record P310.8 billion.

The RTB offer is set to run for three weeks: from July 16 until Aug. 7. The BTr said it can increase the award volume and may also close the offer period earlier as needed.

It also gave retail investors more options to access the debt papers, introducing the BONDS.PH mobile application by the UnionBank of the Philippines, Inc. This is in addition to other electronic payment facilities and participating banks.

The bonds will be issued on Aug. 12 and mature on Aug. 12, 2025.

The government has set a P205-billion borrowing program for July and will offer P145 billion in T-bills via weekly auctions and P60 billion in T-bonds to be auctioned off every other week.

It borrows from local and foreign lenders to plug its budget deficit seen to hit 8.4% of gross domestic product this year. — B.M. Laforga