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Rates of Treasury bills likely to decline ahead of Q1 GDP data

THE RATES of Treasury bills (T-bills) on offer on Monday could decline further as investors await the release of first-quarter gross domestic product (GDP) data.

The Bureau of the Treasury (BTr) is looking to raise P25 billion via its offering of T-bills on Monday, broken down into P5 billion from 91-day debt, P8 billion via the 182-day papers and P12 billion from the 364-day securities.

T-bill yields could decline by 5 to 10 basis points (bps) from their week-ago levels, analysts said.

“Expect bond yields to drift lower as expectations for GDP growth and inflation become more subdued with the lockdown taking its toll on business recovery forecasts,” Noel S. Reyes, first vice-president and chief investment officer at Security Bank Corp., said via Viber on Friday.

The bond trader shared this view, adding last month’s slower-than-expected inflation print will continue to affect yields.

At the secondary market on Friday, the 91-, 182- and 364-day papers were quoted at 1.328%, 1.569%, and 1.884%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Headline inflation rose 4.5% year on year in April, steady from the March pace but faster than the 2.2% print logged in April 2020. This marked the fourth consecutive month that inflation exceeded the annual 2-4% target of the central bank.

Last month’s inflation rate was lower than the median 4.7% in a BusinessWorld poll and settled within the 4.2-5% estimate of the Bangko Sentral ng Pilipinas. The central bank sees inflation averaging at 4.2% this year.

Meanwhile, the Philippine Statistics Authority will report official GDP data for the first quarter on Tuesday.

A BusinessWorld poll of 18 analysts yielded a median estimate of a 2.6% GDP contraction in the first three months of the year as the lockdown in March amid a fresh surge in infections continued to weigh on the country’s economic prospects.

If realized, this would be the fifth consecutive quarter of a GDP decline, albeit better than the 8.3% contraction seen in the fourth quarter of 2020.

The government upsized the volume of T-bills it awarded on Monday last week and also opened its tap facility as rates dropped ahead of the release of April inflation data.

The BTr raised P28.2 billion via the T-bills last week, more than the programmed P25 billion. Total tenders reached P93.9 billion or nearly four times as much as the initial offer. It also opened its tap facility to raise P7 billion more via the one-year securities.

Broken down, the Treasury made a full P5-billion award of the 91-day debt papers it offered from P18.1 billion in bids. The three-month papers fetched an average rate of 1.306%, down by 6.3 bps from 1.369% previously.

Meanwhile, it raised P11.2 billion from the 182-day T-bills, higher than the programmed P8 billion, after the tenor attracted bids worth P38.075 billion. The average yield of the six-month debt also dropped by 8.5 bps to 1.629% from 1.714% previously.

Lastly, the BTr borrowed P12 billion as planned via the 364-day instruments as total tenders hit P37.865 billion. The one-year IOUs were quoted at 1.863%, down 1.7 bps from 1.88% previously.

The Treasury plans to raise P170 billion from the local bond market this month: P100 billion via the weekly offering of T-bills and P70 billion in Treasury bonds to be auctioned off fortnightly.

The government is looking to borrow P3 trillion this year from domestic and external sources to help fund a budget deficit seen to hit 8.9% of GDP. — B.M. Laforga

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