T-bills to fetch higher rates amid thin liquidity
TREASURY BILLS (T-bills) on offer today are expected to fetch slightly higher rates across all tenors due to limited liquidity ahead of the long weekend and still on the back of concerns on domestic inflation as well as heightened uncertainties over the US Federal Reserve’s plans to tighten policy rates this year.
The government plans to raise as much as P15 billion in its first 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 phone interview over the weekend that the offer of the shorter-termed securities is expected to be met with requests for higher returns by investors, with yields on the three-, six- month and one-year papers most likely to go up by 5-10 basis points ( bps).
The government decided to fully award the T-bills it auctioned off last March 14 amid strong investor appetite for all tenors, with rates sought by banks falling within market projections amid excess liquidity in the local financial system.
The Bureau of the Treasury raised P15 billion as planned from that auction, with total bids reaching P35.34 billion, which
was more than twice the government’s offer.
The 91- day T- bills fetched a rate of 2.374%. Meanwhile, the yield on the 182- day securities was quoted at 2.606%. Lastly, the 364-day T-bills fetched a rate of 2.606%.
At the close of trades in the secondary market on Friday, the three- month, six- month, and one-year papers fetched 2.8125%, 2.6893%, and 3.0292%, respectively.
“We’re expecting rates for the T-bills auction to move sideways up by 5-10 bps,” the first trader said. “This is on the back of slight tight liquidity given shortened work week due to the holidays.”
Local markets will be closed on April 13-14 in observance of Maundy Thursday and Good Friday.
“There are still inflation concerns locally but we’re expecting uncertainty in the market to create demand for the shorter dated papers. Investors’ holistic advantage of this particular event of the shortened work week will get higher rates,” the trader noted.
Meanwhile, another trader said in a text message over the weekend that “[r]ates will really depend on the US data,” referring to the non-farm payrolls report.
Latest data from the US Labor Department last Friday bared US job growth in March slowed sharply to 98,000 jobs amid further layoffs from the retail sector, the fewest gain since last May.
“Because based on the latest TDAF (term deposit auction facility) auction, banks/ investors want higher yields on short term investments. Simple reason is inflation/ higher rate expectations,” the trader said.
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. It raised P150.602 billion from its sale of government securities in the three months ended March, below its P180- billion program for the period.