T-bill rates to move in tight range

YIELDS ON Treasury bills (Tbill) on offer this week will likely move sideways as the market looks for firmer leads amid hints of another interest rate hike from the local central bank.

The Bureau of the Treasury is offering P15 billion worth of Treasury bills today. Broken down, the Treasury plans to raise P4 billion and P5 billion through the three-and six-month papers, respectively, and another P6 billion in one-year T-bills.

On Friday, traders said rates on the T-bills will move sideways during today’s auction, with one saying yields could move five basis points higher or lower from the previous auction.

Last week, the government decided to partially award the T-bills on offer, borrowing only P12.1 billion out of the P28.2 billion offered by investors and the programmed P15 billion.

The government made a full award of the 91- day papers but accepted just P3.4 billion out of the P5 billion it intended to raise via the 182-day debt papers.

The Treasury also partially awarded the 364-day bills, raising only P4.7 billion out of the P6-billion offer.

Rates of the three-month paper slid to 3.291%, while the average yields on the six-month and one-year securities climbed to 4.185% and 4.767%, respectively.

At the secondary market on Friday, yields on the 91-day, 182day and 364-day T-bills settled at 3.2552%, 4.3583% and 4.6988%, respectively.

The trader said the T-bills on offer will likely move sideways as the rate of the 91-day papers are already “too low” for investors, while yields of the 364-day benchmark have been “too high.”

“For the three- month tenor, we believe that the rate is already too low because it has been slipping for the past few auctions. For the one-year papers, it’s already too high. So we think it’s going to move sideways,” the trader said in a phone interview on Friday.

The trader added that the market is waiting for firmer leads for now.

“The market is still looking for fresh catalysts and firmer leads. Most of which will be released in August such as the July inflation and the possible local rate hike.”

On Friday, the Bangko Sentral ng Pilipinas (BSP) said it is “considering” another hike in interest rates to temper inflation expectations.

“Let me say that the BSP is considering strong follow- through monetary adjustment at the next meeting of the Monetary Board in August,” BSP Governor Nestor A. Espenilla, Jr. said in a speech.

The BSP added it will take into consideration potential price pressures arising from excessive volatility in the foreign exchange market.

“While we believe that our fundamentals remain solid and healthy, sustained pressures on the peso could adversely affect inflation expectations,” Mr. Espenilla added.

The government reported earlier this month that the country’s inflation accelerated to a fresh five-year high of 5.2% in June.

Last month’s inflation print surged from May’s 4.6% figure and beyond the 4.3-5.1% estimate range by the BSP and the 4.9% estimate of the Department of Finance.

The monetary authority has already raised borrowing costs twice this year. Rates now stand at a 3-4% range.

“The market is still waiting for fresh leads that’s why most players are just on the sidelines for now,” the trader said.

The government is looking to raise P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in Treasury bonds.

The state plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product.