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Treasury bill rates seen moving sideways at auction

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TREASURY BILLS (T-bill) on offer today will likely see their rates move sideways amid continued strong demand as investors look for more signals that domestic inflation is already decelerating, as expected by the central bank.

The Bureau of the Treasury is offering P15 billion worth of T-bills at its auction today.

Broken down, the government is looking to raise P4 billion and P5 billion via three- and six-month papers, respectively, and P6 billion from the one-year debt papers.

A bond trader interviewed on Friday said yields on the T-bills on the auction block today will likely move sideways with an upward bias across all tenors from the previous offer.

“Maybe it will move five basis points (bp) with an upward bias. It will move sideways because the market showed strong demand from the last auctions, so we expect this to continue,” the trader said in a phone interview.

Last week, the Treasury made another full award of the T-bills it offered, with total bids amounting to P30.28 billion — higher than the P28.64 billion booked during the previous auction. Rates of the 91-, 182- and 364-day papers were at 5.295%, 6.28% and 6.521%, respectively.

On Friday, the three-month, six-month, and one-year papers fetched 5.352%, 6.153%, and 6.566%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates.

Meanwhile, another trader said rates of the three- and six-month papers could still go up while the yield on one-year papers should be capped at its current level.

“There’s a possibility that the short end of the curve to correct downwards. Market players are waiting for some signals that inflation has started stabilizing or decelerating this month,” the trader said.

Inflation steadied at 6.7% in October, matching the previous month’s print which was a nine-year high. Month-on-month inflation likewise eased to 0.3% from 0.9% posted in September.

The Bangko Sentral ng Pilipinas (BSP) has raised its policy rates by 175 bps this year after five straight hike to quell inflation expectations, as prices of basic goods and services surged beyond the 2-4% target range set for 2018.

“If inflation decelerated from 6.7%, it may signal that the BSP is done raising its interest rates,” the second trader said.

Meanwhile, the first trader said the short-end of the curve may start to go down “if we see continued strength in the peso or if the BSP cut its reserve requirements for banks.”

Inflation data for November will be released on Dec. 5.

The Treasury is raising P270 billion from the domestic market this quarter through auctions of securities, offering P180 billion in T-bills and another P90 billion in Treasury bonds.

The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal