T-bill rates seen moving sideways


RATES OF the Treasury bills (T-bills) on offer this week may inch down or remain unchanged on the back of high liquidity among investors and the central bank’s latest rate cut.

The Bureau of the Treasury (BTr) will offer P20 billion in T-bills on Monday: P5 billion each in 91-day and 182-day papers and P10 billion in 364-day securities.

A trader said T-bill yields may remain unchanged or move sideways on the back of strong liquidity in the financial system.

“There is still ample liquidity in the market. While inflation grew at a faster rate in October, it remained benign and within the government’s target for this year,” the trader said in an e-mail.

“The interest rates from the central bank could encourage more demand for short-term debt, especially for the 91-day tenor as investors are still waiting for better indicators of economic growth,” the trader added.

Another trader said T-bill rates may continue to decline slightly as investors prefer shorter tenors amid an uncertain economic environment, with coronavirus cases rising anew around the world.

“Investors will continue to park their excess cash on T-bills amid the low-interest environment and lack of better economic outlooks,” the second trader said in an e-mail.

The Treasury last week increased its award of T-bills as yields mostly declined on the back of strong liquidity and as investors continued to favor short-dated debt.

The BTr borrowed P22 billion via the T-bills it auctioned off on Monday, more than the programmed P20 billion, as the offer was over four times oversubscribed, with bids amounting to P80.407 billion.

Broken down, the BTr awarded P7 billion in 91-day papers, higher than the P5-billion program, as tenders reached P24.631 billion. The three-month debt fetched an average rate of 1.019%, down by 0.5 bp from the 1.024% seen in the previous auction.

The government accepted more bids from non-competitive investors for the three-month securities to take advantage of the lower average yield.

Meanwhile, the Treasury awarded P5 billion in 182-day T-bills as planned as bids for the tenor amounted to P22.246 billion. The six-month papers were quoted at an average rate of 1.443%, 1 basis point (bp) lower than the 1.453% logged in the previous offering.

Lastly, the government borrowed the programmed P10 billion via 364-day T-bills as tenders reached P33.53 billion. The average rate of the one-year securities was steady at 1.745%.

At the secondary market on Friday, the 91-day, 182-day and 364-day T-bills were quoted at 1.084%, 1.429% and 1.758%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Inflation rose to its fastest pace in three months in October, the government reported earlier this month.

Preliminary data from the Philippine Statistics Authority showed headline inflation at 2.5% in October, picking up from the 2.3% pace the month before.

The October inflation result marked the fastest pace in three months or since the 2.7% reading in July 2020.

Year to date, inflation settled at 2.5%, still within the central bank’s 2-4% target this year.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) unexpectedly cut benchmark rates to new record lows on Thursday, the fifth reduction this year, citing the continued uncertainty caused by a fresh surge in coronavirus cases globally and the impact of recent typhoons on the struggling economy.

The Monetary Board on Thursday trimmed the rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities by 25 bps to 2%, 2.5%, and 1.5%, respectively.

The latest easing move followed a “prudent pause” by the central bank since its June meeting. The central bank has already cumulatively lowered interest rates. The central bank also upgraded its inflation forecast this year to 2.4% from the 2.3% it gave in the October meeting.

On the other hand, the inflation outlook for 2021 and 2022 were lowered to 2.7% (from 2.8%) and 2.9% (from 3%), respectively, due to the slower-than-expected pickup in domestic activity, the decline in global crude oil prices, and the strengthening of the peso.

The Treasury plans to borrow P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly Treasury bond auctions.

It is also offering another tranche of Premyo bonds to raise at least P3 billion. The offer period is set to run from Nov. 11 to Dec. 18.

The government wants to raise around P3 trillion this year from local and foreign lenders to help fund its budget deficit, which is expected to hit 9.6% of the country’s gross domestic product. — KKTJ

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