Treasury bills expected to fetch flat to lower yields
TREASURY BILLS (T-bills) on offer today are expected to fetch flat to lower yields across all tenors on the back of strong investor appetite for the shorter-termed papers amid bets of a spike in global interest rates next month.
The government plans to raise as much as P15 billion in its second auction of T-bills for the second quarter: P6 billion in 91-day debt papers, P5 billion in 182-day notes and P4 billion in 364-day papers.
A bond trader said in a text message over the weekend that the offer of the shorter-termed securities is expected to fetch steady to lower rates across the board, with banks requesting for yields that are unchanged to 15 basis points ( bps) down compared to the previous Tbills auction last April 24.
“Traders are actually expecting unchanged to 15bps lower. Clear indication that there will be demand on these issues,” the trader said.
“Looks like this will be a good one for the government.”
The government decided to fully award the T- bills it auctioned off last April 24 amid strong demand among investors for shorter tenured debt instruments as the local financial system remained awash with cash.
The Bureau of the Treasury raised P15 billion as planned from that auction, with investors wanting to lend as much as P36.602 billion, more than double the volume of debt papers placed on the auction book.
The 91-day T-bills were fully awarded at P6 billion, after total offers reached an overwhelming P21.155 billion and with the papers fetching a rate of 2.299%.
Likewise, the 182- day securities were fully awarded at P5 billion, with total bids reaching P9.032 billion. The papers were quoted at 2.638%.
Lastly, the government raised P4 billion from its 364-day debt notes after banks wanted to buy as much as P6.415 billion. The securities fetched a yield of 2.989%.
At the close of trades in the secondary market on Friday, the three- month, six- month, and one-year papers were last quoted at 2.6650%, 2.9463%, and 2.8351%, respectively.
Asked why investors would want to invest more on shortertermed debt papers, the trader said: “To avoid wild swings in profit and loss.”
“But to be practical, people just want to stay away from longer tenured bonds because it’s too risky given the expectations of rate hikes,” the trader added.
The US Federal Reserve kept policy rates steady at the close of their May 2-3 Federal Open Market Committee ( FOMC) meeting, but with markets pricing in heightened chances of regulators hiking interest by another 25 bps in June, which if realized, will be the second increase for the year.
For his part, BDO Unibank, Inc.’s Chief Market Strategist Jonathan L. Ravelas said in his weekly interest rate outlook report: “Continue to see rates to move sideways to up in the week ahead.”
The government plans to borrow up to P180 billion locally this quarter — P90 billion each of Treasury bills and Treasury bonds — steady from the previous quarter.