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T-bill rates may move sideways on strong demand and liquidity

YIELDS ON short-term government securities to be offered by the Bureau of the Treasury (BTr) on Monday may remain steady on the back of continued strong demand and high liquidity in the market.

The BTr will auction off P20 billion worth of Treasury bills (T-bills) today: P5 billion each in 91- and 182-day securities and another P10 billion in 363-day debt papers.

T-bill rates are likely to move within the same levels as last week, with strong demand expected to be sustained, ATRAM Trust Corp. Head of Fixed Income Jose Miguel B. Liboro said.

“The higher adjustment in yields that we have been seeing over the last few days are largely due to the sharp spike in US Treasury yields on the back of the Democratic party’s victory in the US Senate,” Mr. Liboro said in an e-mail.

A trader, meanwhile, said liquidity will be the main factor for yield movements this week.

“The upward trajectory of the US Treasury yields may come into mind but this one is so short that it will most likely depend on liquidity only,” the trader said in a Viber message.

The electoral win of Raphael Warnock and Jon Ossof in Georgia on Wednesday sealed the Democrat’s narrow control of both chambers of the US Congress, Reuters reported. This is seen to boost the prospects for the legislative agenda of President-elect Joseph R. Biden.

Meanwhile, the pickup in US Treasury yields last week was backed by market sentiment of a Democrat-controlled government that could likely boost stimulus spending.

At the secondary market on Friday, rates on the three-month, six-month and one-year T-bills were quoted at 1.133%, 1.404% and 1.626%, respectively.

The BTr last week hiked its award of T-bills and even opened its tap facility as yields went down across the board on expectations of slower inflation data.

The Treasury borrowed P24 billion via T-bills on Monday, higher than its P20-billion program as it accepted more bids from non-competitive investors for the three-month and six-month tenors.

The offering was over four times oversubscribed, with tenders reaching P83.638 billion.

The Treasury also opened its tap facility to offer another P10 billion in one-year securities.

Broken down, the BTr raised P7 billion via the 91-day debt papers, exceeding the P5-billion program as bids reached P19.413 billion. The average rate of the three-month T-bills stood at 0.987%, down by 3.5 basis points (bps) from the 1.022% fetched in the Dec. 14 auction.

The Treasury also accepted P7 billion in 182-day papers, more than the P5-billion plan, as tenders amounted to P21.17 billion. The six-month tenor saw its average rate go down by 3.1 bps to 1.369% from 1.4% previously.

For the 364-day securities, the government raised P10 billion as planned out of bids worth P43.055 billion. The one-year T-bills were quoted at 1.614%, down 7.2 bps from the previous average rate of 1.686%.

The BTr plans to borrow P140 billion from the local market this month: P80 billion via weekly auctions of T-bills and P60 billion from fortnightly Treasury bond offerings.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — L.W.T. Noble

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