TREASURY BILLS (T-bills) on offer this week are expected to fetch slightly higher rates as investors take their cue from offshore developments amid a lack of local leads.

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

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said T-bill rates may increase slightly, especially for the longer tenors, as investors take a cue from US markets.

“With muted threat of upside inflation risk, onshore liquidity may be taking its cue from offshore markets wherein liquidity has started migration from a defensive portfolio headlined by US treasuries into a cyclical risk-based portfolio,” Mr. Asuncion said in an e-mail.

He said the US presidential elections may boost government spending there as many Americans are hopeful that candidates from the opposition Democrat Party will lead the election results and fulfil its proposed recovery programs to mitigate the impact of the coronavirus pandemic on the world’s largest economy.

“As the markets price in a Democrat party sweep in the elections, it insinuates a condition of strong fiscal stimulus by which spending is likely to boost next year’s US prospects,” he said.

The US presidential elections on Nov. 3 pits Republican President Donald J. Trump and Vice-President Michael R. Pence against Democrat presidential candidate Joe R. Biden and his vice-presidential candidate Kamala D. Harris.

Meanwhile, a trader said in an e-mail that rates of the longer T-bill tenors may climb amid ample liquidity among investors and a benign inflation outlook.

The Treasury awarded P20 billion in T-bills as programmed last week as the offering was more than thrice oversubscribed, with total tenders amounting to P68.962 billion.

Broken down, the BTr borrowed P5 billion as planned via the 91-day T-bills, with tenders reaching P21.87 billion. The three-month debt fetched an average rate of 1.086%, inching down by 0.2 basis point (bp) from the 1.088% logged in the previous auction.

The Treasury likewise awarded the programmed P5 billion in 182-day debt papers as bids for the tenor amounted to P21.632 billion. The six-month papers were quoted at an average rate of 1.597%, slipping by 0.1 bp from the 1.598% seen in the previous offering.

Lastly, the government made a full P10-billion award of 364-day securities as tenders totaled P25.46 billion. The average rate of the one-year papers settled at 1.793%, unchanged from the previous auction.

At the secondary market on Friday, the three-month, six-month and one-year T-bills fetched yields of 1.124%, 1.571% and 1.808%, respectively, based on the PHL Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

The Treasury is looking to raise P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly T-bond auctions.

The government wants 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. — K.K.T. Jose

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