RATES OF Treasury bills (T-bills) on offer on Monday will likely move sideways on ample demand and while the retail Treasury bonds (RTBs) are on sale.

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

Meanwhile, the BTr canceled the offering of seven-year Treasury bonds (T-bonds) scheduled on Tuesday to give way to the ongoing RTB offering.

Traders interviewed on Friday said they expect yields on the T-bills on offer to move sideways as the market remains liquid, with one trader projecting rates to slip by five to 10 basis points (bps).

“For the T-bills, we still see lower rates, by around 5-10 bps from the previous auction…(due to) sufficient liquidity in the market and preference on the short-term,” the first trader said via phone.

The second trader said yields will move sideways versus the previous auction since rates are already very low and some players might opt to buy the five-year retail bonds currently on sale.

“With the RTB (still on offer), some of it pwede ’yung mga interested baka mapunta sa RTB pa eh (some interested investors can opt for the RTBs), otherwise, more sideways kasi masyado mababa na rin ’yung yields (yields will move sideways movement since they’re already low),” the trader said.

Last week, the BTr made a full award of the P20 billion in T-bills it offered as rates declined across-the-board, with total bids soaring to P93.974 billion.

It accepted P5 billion as planned in three-month papers from total tenders of P21.065 billion at an average rate of 1.587%, lower compared to the 1.649% rate seen in the July 6 auction.

It also made a full award of the six-month T-bills, raising P5 billion from P27.1 billion in bids at an average rate of 1.687%, down from 1.75% previously.

For the one-year securities, the BTr raised P10 billion as planned from tenders worth P45.809 billion. The papers fetched an average rate of 1.782%, from 1.855% previously.

Yields on the 91-, 182- and 364-day debt papers were at 1.587%, 1.66% and 1.838%, respectively, at the secondary market on Friday, the PHP Bloomberg Valuation Service Reference Rates showed.

Both traders said demand for the T-bills will not be very affected by the ongoing RTB offer since these securities cater to different clients.

“Given the current uncertainties in the market, most investors prefer to really stay in the short-end so that’s why we continue to see strong demand on T-bills,” the first trader said.

The BTr is offering five-year RTBs carrying a coupon of 2.625%. The offer period is scheduled to run until Aug. 7, unless closed earlier.

At the RTB rate-setting auction on Thursday, investors swamped the offer, with total bids hitting P278.572 billion, almost ten times the initial P30-billion offer. This prompted the Treasury to upsize its award to P192.71 billion.

This marked the second RTB sale of the government this year and 24th overall, following the issuance in February when it raised a record P310.8 billion from three-year retail bonds at a rate of 4.375%.

The BTr also opened an exchange offer program wherein bondholders of the RTB 10-01, FXTN 05-73, RTB 10-02 or FXTN 07-57, can swap their old securities for the new RTB.

“The total outstanding amount of bonds eligible for the switch is about P321 billion,” the Finance department said in a statement over the weekend.

The retail bonds will be issued on Aug. 12 and are set to mature on Aug. 12, 2025.

Meanwhile, the second trader said the market is very liquid right now and some players are opting to stay on the sidelines while they look for other channels to invest in, such as the upcoming short-term securities of the Bangko Sentral ng Pilipinas.

“The market is very liquid so it’s more of kung saan pwede mag-invest (It’s a matter of where to invest). With expectation of more corporate debt to issue and even BSP will be issuing their (securities or) T-bills version sa market, so I guess medyo, based on the yield na talaga (investors are now looking for yield),” the trader said.

The central bank has said it will issue the BSP securities this quarter to provide more risk-free assets for investors aside from the government instruments.

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 fortnightly

It borrows from local and foreign lenders to plug its budget deficit seen to hit 8.4-9% of gross domestic product this year. — B.M. Laforga

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