RATES OF Treasury bills on offer this week will likely climb as yields move higher on the central bank’s expectations of faster inflation this year.

The Bureau of the Treasury (BTr) is looking to borrow P20 billion via the Treasury bills (T-bills) on Tuesday, broken down into P5 billion each from the 91- and 182-day debt papers and P10 billion via the 364-day instruments.

A trader said yields on the T-bills on offer this week will likely increase by 10 basis points (bps) as investors want higher yields following the central bank’s forecast of faster inflation.

“Yields have risen steadily since the upgrade of inflation forecast and the announcement of the government planned 2021 borrowings,” the trader said.

A second trader also sees T-bills rates climbing by 10 bps as higher consumer spending likely pushed up inflation in August following an easing of lockdown restrictions and reopening of businesses.

The Treasury last week fully awarded the T-bills it auctioned off even as rates inched up after the central bank’s decision to halt monetary easing and amid hopes of a “flattening” in the country’s coronavirus curve.

The BTr borrowed P20 billion via T-bills as planned out of P50.277 billion in bids, or more than twice the offered amount.

Broken down, the BTr made a full P5-billion award of the 91-day debt papers offered from P12.178 billion in tenders. The three-month papers fetched an average rate of 1.131%, up 1.3 bps from the 1.118% logged the previous week.

It also raised P5 billion as planned via the 182-day T-bills out of total bids worth P11.661 billion. The average yield of the six-month papers inched up 1.9 bps to 1.407% from 1.388% previously.

For the 364-day securities, the Treasury raised the programmed P10 billion out of P26.438 billion in bids. The one-year instruments yielded an average rate of 1.751%, up by 0.6 bp from the previous rate of 1.745%.

The Bangko Sentral ng Pilipinas (BSP) now expects inflation to average at 2.6% this year, it said in its Aug. 20 policy review, up from 2.3% previously. This is still within its 2-4% target for 2020.

The central bank said it raised its forecast following faster-than-expected prints in June and July. Inflation in July stood at 2.7%, bringing the seven-month average to 2.5%.

The BSP said on Friday that August inflation likely ranged at 2.5% to 3.3%, mainly driven by an increase in oil prices.

The Philippine Statistics Authority will report official August inflation data this Friday, Sept. 4. 

The Treasury is looking to raise P160 billion from the domestic market in September — P100 billion via weekly auctions of T-bills and P60 billion via Treasury bonds to be offered fortnightly.

The government is looking to borrow around P3 trillion this year from local and foreign lenders to plug a budget deficit expected to hit 9.6% of the country’s gross domestic product. — KKTJ