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Yields on T-bills likely to decline

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RATES OF Treasury bills (T-bill) on offer today are expected to decline across all tenors, as market participants price in the recent sovereign debt rating upgrade of the Philippines and gear up for the slew of domestic data to be released this week.

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 in three- and six-month papers, respectively, and P6 billion in one-year securities.

Traders interviewed before the weekend said yields on the T-bills to be auctioned off Monday will likely be flat or decline by five basis points (bp) across all tenors from the previous offer.

Last week, the BTr partially awarded the T-bills it placed on the auction block, borrowing just P13.01 billion out of P29.257 billion in total bids and the P15 billion it wanted to secure.

Broken down, the Treasury borrowed P4 billion as planned via the 92-day tenor as tenders reached P9.85 billion. The average rate declined 4.5 bps to 5.563%.

The government also made a full award of the 183-day T-bills, accepting the programmed amount of P5 billion, with total offers amounting to P10.947 billion. The tenor’s average yield slipped 1.8 bps to 5.978%.




Meanwhile, for the 365-day T-bills, the government borrowed just P4.01 billion out of the P6 billion it wanted to raise, even with tenders totalling P8.46 billion. The average yield on the papers picked up 3.3 bps to 6.085%.

At the secondary market on Friday, the three-month, six-month and one-year papers were quoted at 5.693%, 5.942% and 6.064%, respectively, based on the PHP Bloomberg Valuation Service Reference Rates.

Robinsons Bank Corp. trader Kevin S. Palma said demand for the T-bills on offer today will likely “still possibly skewed on the shorter dates” following the credit rating upgrade of the country.

S&P Global Ratings last week raised the country’s long-term credit rating to “BBB+” from “BBB,” just a notch away from the “A” level.

“So far, the market already rallied. The market is now pricing in the recent upgrade,” another trader said.

Both traders added that market participants will also position ahead of a data-rich week.

“April inflation and first quarter GDP (gross domestic product) growth data will be released just in time to set the stage for the much anticipated Monetary Board meeting on May 9,” Mr. Palma said.

Inflation likely eased further eased for the sixth straight month in April on the back of a decline in rice prices. A BusinessWorld poll of 10 economists yielded a 3.1% median estimate for last month, which if realized will be slower than the 3.3% rate the previous month.

According to a separate poll, the country’s first-quarter GDP growth is expected to be at 6.1%, easing from the 6.3% expansion the previous quarter and 6.5% in the first three months of 2018, taking into account the impact of the four-month delay in the enactment of the national budget.

Meanwhile, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno sees room to ease monetary policy at its review on Thursday, as the recent credit rating upgrade is “another factor” to “move faster.”

“Local bond yields have trended lower after the S&P announcement, so the market may have already priced in the upgrade. But we may see this rally grow legs after BSP Governor Diokno’s pronouncements that the S&P upgrade could hasten monetary policy easing,” 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 in Treasury bonds.

It is looking to borrow 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