T-bills seen to fetch lower rates
TREASURY BILLS (T-bills) on offer today are expected to fetch lower yields across the board, as the financial system remains awash with cash and amid strong appetite for shorter-termed debt.
The government plans to raise as much as P15 billion in today’s auction of T- bills: 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 phone interview over the weekend that the offer of the shorter- termed securities will likely be met with slightly lower bids from investors, with rates seen to go down by five to 10 basis points ( bps) on all tenors on the back of ample liquidity in the market.
Meanwhile, another trader said in a text message: “I think this will be a healthy auction given that rates moved lower after expectations of US rate hike dropped.”
Global markets are anticipating the US Federal Reserve to hike interest rates by at least two more times this year after authorities decided to increase policy rates in March, the first tightening move in 2017 and the second after it lifted borrowing costs in December 2016.
The government fully awarded the T- bills it auctioned off last May 8 as investors preferred shorter-termed debt notes due to heightened caution on the anticipated US Fed hike in June.
The Bureau of the Treasury raised P15 billion as planned at that auction after total tenders reached P34.51 billion, more than twice the original offer.
The 91-day T-bills received a total of P17.513 billion in tenders, higher than the programmed P6 billion, with the government fully awarding the papers quoted at an average rate of 2.205%.
Meanwhile, the government also raised P5 billion as planned from the 182- day securities, which fetched a 2.602% yield. Offers came in at P7.501 billion, slightly above the P5 billion offered.
Lastly, the 364- day T- bills were also fully awarded at P4 billion after offers reached P9.495 billion, more than twice the offer. It fetched a rate of 2.966%.
At the close of trading in the secondary market on Friday, the
three-month, six-month, and one-year papers fetched 2.7217%, 2.8667%, and 2.8228%, respectively.
Asked what risks and concerns investors could be considering, one trader said: “Still the same concerns: domestic inflation as well as the print of local GDP ( gross domestic product), which was lower than consensus because of underspending.”
The country’s GDP growth in the first quarter stood 6.4%, well below the government’s 7% estimate and slower than the 6.6% seen the previous quarter and from the 6.9% registered in the same period last year.
Similarly, the other trader said, “Also considering that disappointing GDP number, as an investor, I would think that the government will not borrow more (exceed borrowing target) for the meantime given that most projects will begin next year, so there will be less supply of bonds.”
“The GDP number tempers inflation expectations since demand is not enough to push the numbers higher.”
The government plans to borrow up to P180 billion from the domestic market this quarter through T-bills and Treasury bonds to fund its fiscal deficit.