T-bill rates to move sideways on ample demand

Bureau of Treasury (BoT)

YIELDS ON Treasury bills (T-bills) to be auctioned off on Monday are expected to move sideways despite the faster-than-expected inflation in November as investors still prefer to park their excess funds on these short-term and safe-haven assets.

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

Two traders said yields will likely move sideways or five basis points (bps) higher than those fetched at last week’s auction.

“Despite the uptick in inflation for the month of November, yields of T-bills may just move sideways to 5 bps higher from previous auction with investors’ inclination still leaning towards the safest option and these are the short-term government securities,” Kevin S. Palma, peso sovereign debt trader of Robinsons Bank Corp., said in a Viber message on Saturday.

A trader said the faster-than-expected inflation last month could push the yields of government securities up as investors “would want to preserve their purchasing power against rising prices.”


The government made a full award of the T-bills it offered last week as yields ended mixed due to expectations of faster inflation and a sluggish economy.

The BTr borrowed P20 billion as planned via the T-bills as the offer was almost four times oversubscribed, with bids amounting to P75.906 billion.

Broken down, the BTr borrowed the programmed P5 billion from the 91-day T-bills as tenders reached P19.321 billion. The three-month debt fetched an average rate of 1.006%, up by 2 bps from the 0.986% seen in the previous auction.

The Treasury also awarded P5 billion as planned in 182-day debt as bids amounted to P20.41 billion. The six-month papers were quoted at an average rate of 1.386%, inching up by 0.1 bp from the 1.385% logged in the previous offering.

Lastly, the government raised P10 billion as programmed via the 364-day securities as tenders totaled P36.175 billion. The average rate of the one-year securities stood at 1.693%, slipping by 0.2 bp from the 1.695% seen in the previous auction.

At the secondary market on Friday, the three-month, six-month and one-year T-bills were quoted at 1.12%, 1.43% and 1.701%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the Philippine Statistics Authority on Friday reported that headline inflation quickened to 3.3% in November from 2.5% in October and 1.3% in November 2019 after the recent typhoons and massive floods that hit the country pushed prices of agricultural goods.

Year to date, inflation averaged at 2.5%, still within the BSP’s 2-4% target as well as the 2.4%-2.6% estimate of the economic team. The BSP expects inflation to average at 2.4% this year.

“The inflation rate is still within the 2-4% inflation target range. However, to ensure prompt price normalization, the DA (Department of Agriculture) and DoTr (Department of Transportation) may need to facilitate movement of food supplies from imports and food-surplus regions,” the Finance department said in an economic bulletin.

The Treasury plans to borrow P120 billion from domestic lenders in December: P60 billion in weekly T-bill auctions and P60 billion in fortnightly Treasury bond offerings.

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. — Beatrice M. Laforga


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