Treasury bills likely to fetch lower rates on strong investor demand

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RATES OF THE Treasury bills (T-bill) on offer today will likely decline anew due to strong demand for short-term debt papers.

The Bureau of the Treasury (BTr) is offering P15 billion worth of Treasury bills (T-bill) today, broken down into P4 billion and P5 billion for the three- and six-month instruments, respectively, and P6 billion in one-year papers.

“Average yields of T-bills may drop around 20-30 basis points (bp) from the previous auction,” Robinsons Bank Corp. peso debt trader Kevin S. Palma said in a phone message on Saturday.

On June 25, the government made a full award of the T-bills it placed on the auction block, borrowing P15 billion as planned. Yields on the three-month, six-month and one-year debt papers slid to 4.385%, 4.723% and 4.986%, respectively.

At the secondary market on Friday, the 91-, 182- and 364-day securities were quoted at 4.329%, 4.544% and 4.851%, respectively, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Another trader said the T-bills on offer today will likely fetch strong demand from market participants.

“T-bill rates will likely decline by 10-20 bps from the previous auction due to strong demand on short-end papers given the limited supply,” the trader said in a phone interview on Friday.

The government is set to borrow P230 billion from the domestic market this quarter through a mix of T-bills and Treasury bonds, lower than the P315 billion planned in April-June and the P300 billion placed on the auction block in the same period last year.

The BTr will raise P90 billion in T-bills between July and September through six fortnightly auctions, coming from a weekly offering the previous quarter.

“The T-bill auction will draw a solid demand for sure. Aside from the reduced offering for short-term papers this quarter, market sentiment remains positive on the back of strong and improving fundamentals of the country,” Mr. Palma said.

Inflation eased in June to post its slowest reading in almost two years at 2.7%, down from 3.2% in May and 5.2% in June 2018.

The June result fell within the Bangko Sentral ng Pilipinas’ (BSP) 2.2-3% estimate for the month and was also softer than the 2.9% median in a BusinessWorld poll of 12 economists.

“Given the lower inflation, the market is pricing in a possibility of a rate cut from the BSP,” the trader said.

Mr. Palma added that the market’s reinvestment requirements due to T-bills amounting to P19.5 billion maturing on Wednesday will “further invigorate demand for short dates.”

The government is looking to raise 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 gross domestic product. — Karl Angelo N. Vidal