YIELDS ON Treasury bills (T-bill) on auction today will likely move sideways as market players are seen to stay on the sidelines to await firmer leads.
The Bureau of the Treasury is offering P15 billion worth of T-bills on Monday, broken down into P4 billion and P5 billion in three- and six-month papers, respectively, and P6 billion in one-year debt papers.
A trader said on Friday that rates of the T-bills on the auction block today will move sideways to five basis points higher from the previous auction.
“Based on the previous auction results, medyo mataas na rin kasi ang rates (the rates are quite high),” the trader said in a phone interview.
Last week, the government partially awarded the T-bills it offered, borrowing just P11.075 billion out of the programmed P15 billion. The 91-day T-bill’s rate slid 2.3 basis points to 5.612%, while 182- and 364-day IOUs fetched higher yields at 5.982% and 6.052%, respectively.
At the secondary market on Friday, the three-month, six-month and one-year securities were quoted at 5.727%, 5.954% and 6.087%, based on the PHB Bloomberg Valuation Reference Rates.
“(Market) players will be waiting on the sidelines while waiting for firmer leads. Probably any developments locally such as the reserve cut if meron (there will be any),” the trader said.
Noting that inflation is “right now…under control,” Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said a cut in benchmark interest rates will be considered at the central bank’s third policy review for this year on May 9.
“We’re considering it. I’m sure that will be on the agenda in the next policy meeting,” Mr. Diokno said in an interview with Bloomberg Television Friday.
He also floated the possibility of a reduction in big banks’ reserve requirement ratio, which is currently at 18%. “It’s a question of timing which will be first, the rates cut or the cut in the reserve ratio.”
“Demand for the shortest end may stem from anticipations from the market of an RRR cut in the coming months, and then policy cut may follow suit once inflation returns to mid target which is at 3%,” Kevin S. Palma, Robinsons Bank Corp. peso sovereign debt trader, said in an e-mail on Saturday.
He added that yields on the T-bills to be auctioned off today will likely move sideways from the previous auction, with demand concentrated on the shortest tenor.
“An oversubscription may also be likely due to re-investment demand with P11.1 billion T-bills maturing on April 17,” Mr. Palma added.
The government plans to borrow P315 billion from the domestic market this quarter, broken down into P195 billion in T-bills and P120 billion through Treasury bonds.
It is looking to borrow some P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of the country’s gross domestic product. — Karl Angelo N. Vidal