T-bill rates seen mixed on COVID-19 fears

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RATES OF Treasury bills (T-bills) on offer this week will likely end mixed as the escalating coronavirus disease 2019 (COVID-19) outbreak and its impact on the economy raise uncertainties.

The Bureau of the Treasury (BTr) will offer P20 billion worth of T-bills on Monday, broken down into P10 billion in 91-day papers and P5 billion each for the 182- and 364-day securities.

On Tuesday, the government will auction off 35-day T-bills to raise P15 billion.

Jose Miguel B. Liboro, head of fixed income at ATRAM Trust Corp., said yields for the short-term papers on offer this week might come in lower as the stimulus measures introduced by the central bank over the past two weeks helped calm down financial markets.

“Yields on the T-bills likely to come in lower — recent BSP actions (liquidity injections via overnight and RRR cuts and limited support on 3yr-7yr rates) have been able to stabilize the market somewhat and may prove an effective backstop against further sharp sell-offs in the GS market,” Mr. Liboro said in an e-mailed response on Friday.

He added that auction results last week showed the government has “flexibility in funding requirements” and could reject bids asking for “unreasonably high” rates.

The BTr rejected the P14.5 billion in bids out up for its P20-billion offer of T-bills last week due to higher rates.

Had it made a full award, the 91-day papers would have fetched an average rate of 3.841%, up from the previous yield of 3.024%.

For the 182-day T-bills, the average rate would have settled at 4.766%, up 136.8 bps, if all P4.12 billion bids were accepted, while yields on the 364-day securities would have reached 5.35%, up 179 bps, if the BTr made a full award of the P2.85 billion in tenders.

At the secondary market on Friday, rates of the one-, three- and six-month papers stood at 3.07%, 3.193% and 3.387%, respectively, while the one-year securities were quoted at 3.803%.

However, for ING Bank N.V.-Manila Senior Economist Nicholas Antonio T. Mapa, T-bills on offer this week may fetch higher rates as the rising number of positive cases in the country causes uncertainties in the market.

“In general, we may continue to expect higher yields during the T-bill auction until we may see some definitive turn in the number of cases of COVID-19, which at the moment continue to climb,” Mr. Mapa said in an e-mail on Friday.

Mr. Mapa said the reintroduced 35-day papers might “see some interest from players,” while bids for 91-, 182- and 364-day T-bills could expect subdued demand as investors prefer to hold on to their cash.

While the Bangko Sentral ng Pilipinas’ (BSP) “copious amounts of actions” recently gave relief to the markets, he said “sentiment remains susceptible to quick reversals.”

Offshore, Mr. Mapa said, “we’ve had a bit of a respite of late with the US passing their own fiscal response package but things over the weekend may tip the scales in the other direction.”

The central bank last week agreed to buy P300 billion in securities from the BTr through a repurchase agreement to support the government’s funding needs for its COVID-19 response.

This, on top of the 50-bp cut it delivered earlier this month, the 200-bp reduction in the reserve requirement ratio of universal and commercial banks, the P20 billion in dividends remitted to the Treasury last week, as well as the regulatory relief it gave to the lenders.

On the fiscal front, the economic team earlier this month also rolled out an initial P27.1-billion funding package to finance efforts against COVID-19 while Republic Act No. 11469 or the Bayanihan to Heal as One Act signed last week will allow the government to realign as much as P275 billion from the national budget and make off-budget outlays.

Finance Secretary Carlos G. Dominguez III has said the government plans to seek $1-2 billion worth of funding support from multilateral agencies.

The Asian Development Bank said another funding package worth at least $1.6 billion will be provided to the Philippines in the coming weeks, on top of the $3 million grant it gave earlier, while the World Bank pledged a $100-million loan to the country.

As of Saturday evening, the country’s confirmed COVID-19 cases reached 1,075, with 68 fatalities and 35 recoveries.

The Treasury has set a P190-billion local borrowing program for April, broken down into P130 billion in T-bills and P60 billion in T-bonds.

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