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T-bill rates may move sideways on ample liquidity, lack of leads

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YIELDS ON THE Treasury bills (T-bills) to be auctioned off on Monday will likely move sideways amid strong liquidity.

The Bureau of the Treasury (BTr) will offer P20 billion via T-bills today, broken down into P6 billion for the 91- and 182-day papers and another P8 billion for the 364-day bills.

Also this week, on Tuesday, the BTr will start offering three-year fixed-rate retail Treasury Bonds (RTBs) to raise at least P30 billion. The Treasury will have the option to upsize the volume or adjust the offer period — which is set to end on Feb. 6 — as it deems necessary.

For Kevin S. Palma, the government’s 23rd RTB issuance is expected to be met with strong demand, as what has been observed in previous offerings.

For the T-bills, two bond traders said rates of the short-term securities will move sideways as the market still has sufficient liquidity.

Specifically, the first trader said the one-year securities will move sideways but rates on the three-month and six-month papers are expected to inch up by 5 to 10 basis points (bps).




The second trader, meanwhile, said the fear of an uptick in inflation for the month may push investors to the sidelines as they continue to monitor further developments in the Taal Volcano.

The government partially awarded the T-bills it auctioned off last week as rates increased across-the-board amid continued worries due to the Taal Volcano eruption, which has already been considered as an upside risk to inflation.

The BTr raised just P14.7 billion via the T-bills out of its P20-billion program, even as the auction fetched bids totaling P33.502 billion.

The Treasury fully awarded the three-month papers even as the tenor fetched higher rates, while opting to partially award the 182- and 364-day T-bills.

Broken down, the government fully awarded the P6 billion it wanted to borrow via the three-month T-bills at an average rate of 3.39%, 6.2 bps higher than the 3.328% fetched during the last auction on Jan. 14. This, as the papers fetched bids totaling P13.927 billion, more than double the Treasury’s program.

On the other hand, the Treasury accepted just P3.02 billion in bids for the six-month papers out of the P6-billion program despite a total of P8.27 billion worth of bids. The average rate for the 182-day T-bills was at 3.652%, higher by 6.5 bps than the 3.587% seen in the previous offer.

For the 364-day papers, the Treasury raised only P5.685 billion out of the P8-billion program despite receiving P11.305 billion in tenders for the tenor. The one-year securities yielded an average rate of 3.971%, rising 7.5 bps from the 3.896% quoted during the last auction.

At the secondary market on Friday, the yields on the three-month and six-month T-bills were quoted at 3.307% and 3.518%, respectively, while the one-year securities fetched a rate of 3.87%.

“For the T-bills auction, sideways on the one-year and then perhaps, 5-10 bps on the 91 and 182 days. Strong demand in the short tenor due to sufficient market liquidity,” the first trader said.

The second trader said rates of the papers “will move sideways because at the secondary market, there has been an adjustment, more or less, from the fear of inflation from the Taal. I think T-bills will trade within the range (observed) last week. Well the fear has already subsided (Taal eruption), we’ll see.”

The Philippine Statistics Authority will report January inflation data on Feb. 5.

The Taal Volcano in Batangas erupted in Jan. 12 and has been on alert level four for almost two weeks. On Sunday, the government announced in a notice that the status will be lowered to Alert Level 3 due to declining volcanic activity.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via Treasury bonds.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — B.M. Laforga









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