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Treasury bill rates to end mixed ahead of inflation, policy meet

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YIELDS ON Treasury bills (T-bills) on offer today will likely end mixed as investors may stay on the sidelines ahead of inflation data due Wednesday and the Monetary Board’s (MB) position on policy rate the following day.

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

The auction for five-year Treasury bonds earlier scheduled on Tuesday was canceled since the offer period for the 23rd retail Treasury bonds is still ongoing until Thursday.

Sought for comment, a bond trader said the three-month and six-month papers will likely fetch lower rates while the yield on the one-year T-bills may just move sideways.

“Factors to consider are the recent outbreak of coronavirus, the CPI (consumer price index) data to be released [this] week and the MB meeting later in the week,” the trader said via telephone.

At the secondary market, yields on the 91-, 182- and 364-day T-bills were at 3.303% 3.474% and 3.896% on Friday.




Last week, the government fully awarded P20 billion in T-bills as planned as rates declined across-the-board on strong demand.

Specifically, P6 billion was raised from the three-month papers out of the P18.832 billion bids, at an average rate of 3.297%, lower than the 3.39% yield fetched in the Jan. 20 auction.

The government borrowed another P6 billion as programmed via the six-month papers out of tenders worth P11.995 billion. The yield on 182-day T-bills also dropped to 3.597% from the previous 3.652% rate.

For the 364-day securities, the Treasury accepted P8 billion as planned out of total bids worth P13.689 billion. The average rate for the one-year papers likewise declined to 3.963% from 3.971% previously.

Michael L. Ricafort, chief economist at the Rizal Commercial Banking Corp., said the T-bill yields will likely be “steady” or move slightly lower amid easing of global interest rates due to rising concerns on the new virus outbreak and a potential global economic slowdown.

“In view of the recent decline in global oil prices and lower benchmark interest rates/bond yields in the US and other developed due to global economic growth concerns over the novel coronavirus, the markets are also anticipating the possibility of monetary easing in the upcoming monetary policy-setting meeting on Feb. 6, 2020, a day after the Feb. 5 announcement of the inflation data, as both of these events may be the biggest market catalysts for the week,” Mr. Ricafort said on Sunday via mobile phone message.

On Sunday, the Department of Health (DoH) reported the first novel coronavirus acute respiratory disease (2019-nCoV ARD) death outside of China, as another patient positive for the virus died on Feb. 1. This brought the confirmed cases in the Philippines to two.

The DoH said the first 2019-nCoV ARD fatality in the country was a 44-year-old man who traveled to the Philippines from Wuhan, China with the 38-year-old woman who was confirmed positive for the virus last week.

As of Sunday, the DoH said there are 36 persons under investigation for the virus.

Economic managers last week were quick to assure that the outbreak will have a minimal impact on the tourism sector as travels abroad will be limited, adding that it is still too early to measure its effect on the economy.

For private economists like UnionBank of the Philippines, Inc.’s research department, the country’s trade and tourism sectors will take a hit over the long term if the outbreak lasts at least six months.

Meanwhile, the Philippine Statistics Authority will report on Wednesday, Feb. 5, inflation data for January, while the Bangko Sentral ng Pilipinas (BSP) Monetary Board will have its first rate-setting for the year the day after on Thursday, Feb. 6.

BusinessWorld’s poll of 13 economists yielded a median estimate of 2.7% for January headline inflation, with analysts citing upside risks from the Taal Volcano eruption and a rise in some food prices still due to the African Swine Fever.

If realized, the reading will mark the third straight month of an uptick in inflation and will be faster than the 2.5% seen in December. However, this is still slower compared to the 4.4% pace in January 2019 and also falls closer to the lower end of the 2.5-3.3% range given by the BSP. This is also well within the 2-4% target for the year.

Meanwhile, 10 out of the 13 economists who joined the inflation poll were of the view that the BSP Monetary Board will ease rates by another 25 basis points (bps) this Feb. 6.

BSP Governor Benjamin E. Diokno last week said the central bank is still looking to bring down rates by around 50 bps in 2020. He said a 25-bp cut could also be considered as early as this quarter.

The BSP last year cut rates by a total of 75 bps, partially unwinding the 175 bps worth of hikes implemented in 2018 to quell multi-year high inflation.

Benchmark rates currently stand at 3.5% for the overnight deposit facility, four percent for overnight reverse repurchase and 4.5% for overnight lending.

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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