RATES OF THE Treasury bills (T-bills) on offer on Monday will likely move sideways as investors wait for firmer leads, with the outlook for the economy looking dim.

The Bureau of the Treasury (BTr) is looking to raise P20 billion via T-bills on Monday: P5 billion each via the 91- and 182-day debt papers and P10 billion from the 364-day securities.

A trader said the rates of the T-bills will likely remain steady or rise by five basis points (bps) as investors are still unsure of the country’s economic recovery.

“The rates could be unchanged or emerge higher by five basis points due to lack of catalysts. The market is still gauging if the country is really starting to recover as we continue to reopen the economy,” the trader said via Viber.

Another trader said in an e-mail that demand for government debt will be muted as markets look ahead to the US Federal Reserve’s policy meeting this week.

The Treasury borrowed P20 billion as planned via the T-bills last week as the offer was almost thrice oversubscribed, with bids reaching P56.687 billion.

Broken down, the BTr raised P5 billion as planned via the 91-day debt papers out of total tenders worth P19.028 billion. The three-month papers fetched an average rate of 1.167%, down by 1.3 bps.

The government also made a full award of the 182-day T-bills, awarding the programmed P5 billion, as the papers fetched bids worth P11.008 billion. This, even as the six-month securities were quoted at an average yield of 1.518%, up 9.7 bps.

The Treasury likewise accepted the programmed P10 billion for the 364-day papers as the tenor attracted tenders worth P26.651 billion. The one-year T-bills fetched an average rate of 1.807%, up 1.9 bps.

At the secondary market last Friday, the three-month, six-month and one-year securities fetched yields of 1.201%, 1.496% and 1.828%, respectively.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said last Friday he believes the economy will not deteriorate further in the next 12 months as businesses are gradually resuming and with the virus better managed.

“I expect that the economy will be more open in Q4 than in Q3, more open in Q1 2021 than in Q4 2020, and so on. So it boggles my mind how the economy will be worse 12 months from now,” Mr. Diokno said.

After the country’s gross domestic product’s (GDP) record 16.5% contraction in the second quarter, which plunged it into recession, Mr. Diokno said he “cannot imagine how the economy will be worse off” as lockdown measures have already been eased since then.

The government expects GDP to shrink by 4.5% to 6.6% this year amid the ongoing crisis. By 2021, the economy is seen bouncing back with a 6.5% to 7.5% growth.

Meanwhile, the US central bank will hold a policy meeting on Sept. 15-16. The Fed slashed rates to near zero in March and has rolled out lending programs to support businesses and households. It is also buying tens of billions of bonds monthly to keep markets functioning smoothly.

Fed Chairman Jerome Powell said earlier this month that while the central bank will keep its foot on the monetary policy gas, lawmakers also need to help with recovery relief, making the government’s failure to pass the next round of stimulus an increasingly worrying development to some investors.

Investors are also hoping to learn more about the Fed’s strategic decision to allow periods of higher inflation as it puts more emphasis on bolstering the labor market. They will also be looking to the Fed’s summary of economic projections, known as the “dot plot,” for clues on how quickly the central bank expects labor markets to recover and how soon it may lift rates from record lows, Reuters reported.

The Treasury is looking to raise P160 billion from the domestic market this month: P100 billion via weekly auctions of T-bills and P60 billion via Treasury bonds to be offered fortnightly.

The government is looking to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — KKTJ with Reuters

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