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T-bill rates may move sideways ahead of Treasury’s RTB offer

RATES of Treasury bills (T-bills) on offer this week will likely move sideways ahead of the government’s sale of three-year retail Treasury bonds (RTBs).

The Bureau of the Treasury (BTr) is looking to raise P20 billion from the T-bills on offer on Monday, broken down into P5 billion each via the 91- and 182-day debt papers and P10 billion from the 364-day instruments.

Rates of the short-term debt will likely inch down by 5 to 10 basis points (bps) amid abundant liquidity in the market, a bond trader said by phone on Friday.

Meanwhile, another trader said the auction would still attract lower yields despite the upcoming RTB sale this week as there is strong demand for the shorter-tenored T-bills.

“Yields for T-bills will move sideways to down by around 5 bps since end-users are still looking to purchase T-bills. For now, traders may limit trading short-term bonds until the rate setting of the RTB,” the trader said via Viber over the weekend.

The BTr last week hiked the volume of T-bills it awarded to P24 billion from the P20-billion program as total bids reached P103.65 billion and rates declined across the board.

Broken down, the BTr borrowed P7 billion via the 91-day debt, more than the P5-billion plan, from P19.56 billion in bids. The three-month papers fetched a lower average rate of 0.917% against the 0.969% quoted in the Jan. 25 auction.

The government also raised P7 billion via the 182-day T-bills, above the P5-billion program, as tenders amounted to P33.456 billion. The average rate of the six-month debt declined by 11.3 bps to 1.21% from the previous week’s rate of 1.323%.

The Treasury, meanwhile, made a full P10-billion award of the 364-day securities it offered at an average rate of 1.492%, down 5 bps from 1.542% previously.

Meanwhile, the BTr will hold the rate-setting auction for the three-year RTBs on Tuesday as it looks to raise at least P30 billion from the retail papers. It will offer the bonds in denominations of P5,000 from Feb. 9 to March 4, unless ended earlier.

The second trader expects the rate of the three-year bonds to range from 2% to 2.375%.

“The issuance comes at a time when inflation for the previous month was higher than the expected consensus and above the target range of the BSP (Bangko Sentral ng Pilipinas),” the trader said.

The government offers RTBs to encourage small retail investors to invest, with higher returns than prevailing market rates. These are also considered low-risk investments because they are backed by the state.

At the secondary market on Friday, the 91-, 182, and 364-day T-bills were quoted at 1.041%, 1.204%, and 1.416%, respectively, while the three-year tenor fetched 2.074%, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The second trader said yields on government securities on offer this week will also be affected by rising interest rates in the United States as markets await the $1.9-trillion stimulus package of US President Joseph R. Biden, Jr. 

“This may be offset by slower local loan growth since banks remain wary of credit risks and some banks may be looking to place excess liquidity in safer assets,” the trader added.

Bank lending contracted for the first time in more than 14 years in December as lenders tightened credit standards while demand for loans remained weak.

Latest central bank data showed outstanding loans by big banks went down by 0.7% to P9.178 trillion that month from P9.242 trillion a year ago, turning around from the 0.5% uptick in November. It was the first decline since September 2006’s 1.9% contraction.

The BTr plans to borrow P140 billion from the local debt market this month: P80 billion via weekly auctions of T-bills and P30 billion from a Treasury bond offer.

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. — B.M. Laforga

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