T-bill rates may move sideways as retail bond offer continues

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Bureau of Treasury
RATES of the Treasury bills on the auction block on Monday may move sideways due to the ongoing retail bond offer. — BW FILE PHOTO

RATES OF Treasury bills (T-bills) on offer this week will likely move sideways as the government’s offer of three-year retail Treasury bonds (RTBs) continues.

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

Analysts said the rates of short-term papers could move sideways this week.

“[Movement of the T-bill rates] should be sideways given the nature of demand (end users) for that sector,” a trader said on Sunday.

“Five years and longer (tenor) will be more pressured on CPI (consumer price index) concerns and as it becomes clear that we don’t expect additional monetary stimulus measures (hence downside for rates are limited),” the trader added.

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Headline inflation quickened to a two-year high at 4.2% in January as prices of food and transport continued to spike.

However, despite expectations of a further increase in inflation in the coming months, the Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board on Feb. 11 kept its benchmark interest rates unchanged at their current record lows to support the economy’s recovery.

Still, it raised its average inflation forecast for the year to 4%, the upper end of its 2-4% target, from 3.2% previously.

Meanwhile, the BSP lowered its inflation forecast for next year to 2.7% from 2.9% previously.

The yields of the T-bills on offer on Monday could move sideways or end mixed while the three-year RTBs are still on sale, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Mr. Ricafort, however, said a yield uptick is possible after rates of the BSP’s term deposit facility (TDF) and short-term securities climbed last week.

“Continued excess liquidity in the financial system as manifested by large bids recently in various government securities auctions and in TDF and 28-day BSP securities weekly auctions despite the ongoing RTB auction could at least keep T-bill yields low,” he said via Viber on Sunday.

The average rate for the one-week term deposits inched up by 1.56 basis points (bps) to 1.631% last week, while the rates of two-week tenor also went up by 1.79 bps to 1.6443%.

Meanwhile, the yield on the BSP’s 28-day securities also rose by 2.81 bps to 1.6683% at the Friday auction.

The BTr raised P24 billion from the T-bills it offered last week, more than its P20-billion program, as rates continued to drop across the board.

Broken down, the Treasury raised P7 billion in 91-day debt papers from tenders worth P17.45 billion. The three-month T-bills fetched an average rate of 0.845%, down from the 0.846% quoted in the Feb. 8 auction.

It also borrowed P7 billion from the 182-day T-bills against the P5-billion program after bids hit P30.05 billion. The average rate of the six-month papers went down to 1.046% from the previous rate of 1.094%.

Lastly, for the 364-day securities, the government made a full P10-billion award with P41.11 billion in total bids. The one-year T-bills fetched a lower average rate of 1.416% against 1.446% previously.

At the secondary market on Friday, the three-month, six-month and one-year papers were quoted at 0.85%, 1.061%, and 1.496%, respectively, based on PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The government is offering the three-year RTBs until March 4, unless closed earlier. The bonds carry a coupon rate of 2.375% and are being sold for a minimum investment of P5,000.

The Treasury sold an initial P221.218 billion in RTBs at the rate-setting auction held on Feb. 9.

The BTr wants to borrow P110 billion from the local debt market this month: P80 billion via weekly auctions of T-bills and P30 billion from a Treasury bond offer. It canceled a previously scheduled bond auction for its RTB offering.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — B.M. Laforga

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