T-bill rates seen mixed

RATES OF THE Treasury bills (T-bills) on offer on Monday will likely end mixed amid a lack of catalysts, but demand is expected to remain strong as investors continue to park their money in safe assets.

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

Two traders said they expect no strong movements in the yields of short-term securities this year, but the auction will still see robust demand.

The first trader said T-bill rates will end mixed on Monday, with the rates of the shorter tenors likely to fall by up to 5 basis points (bps) while the yield on the one-year instruments could inch up.

The trader said no drastic change in rates is expected in the absence of fresh leads, unless US Treasuries see a big swing in the near term.

“Robust market liquidity along with risk aversion are perfect ingredients to make for a successful T-bill auction. Investors still prefer the short-end of the curve with the pandemic still very much at large,” a third bond trader said via Viber on Friday.

The trader said investors will watch out for the release of the BTr’s May borrowing program and the central bank’s April inflation forecast this week.

The Treasury is expected to release the schedule of auctions for May within this week. Meanwhile, the Bangko Sentral ng Pilipinas is set to come out with its April inflation forecast on Friday, with the official data expected to be reported on May 6.

Headline inflation slowed to 4.5% in March from the 4.7% seen in February, mainly because of the slower rise in food prices.

The central bank expects inflation to average 4.2% this year, beyond its 2-4% target, but stressed major upside risks were mainly due to low supply of some commodities such as meat.

The BTr last week made a full P25-billion award of the T-bills it auctioned off as bids reached P71.65 billion.

Broken down, the Treasury raised P5 billion as planned via the 91-day papers. The three-month T-bills fetched an average rate of 1.349%, higher than the 1.325% seen on April 12.

It also awarded the programmed P8 billion in 182-day T-bills. The average yield of the six-month papers inched up to 1.713% from 1.695% previously.

Lastly, the BTr made a full P12-billion award of the 364-day securities it offered last week, as the tenor was quoted at an average rate of 1.884%, down from the previous rate of 1.903%. The government also raised another P5 billion from the one-year securities at the same rate from its tap facility offer.

The Treasury wants to raise P170 billion from the local debt market this month: P100 billion via weekly offers of T-bills and P70 billion from fortnightly auctions of Treasury bonds.

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 gross domestic product. — B.M. Laforga