Treasury bills seen to fetch higher yields
YIELDS on Treasury bills (Tbills) on auction today are seen to move sideways following the release of minutes of the January meeting of the US Federal Reserve.
The Bureau of the Treasury plans to raise as much as P20 billion from the short- tenored securities today.
Broken down, the government will auction off P9 billion in threemonth debt papers, P6 billion in six-month T-bills, and P5 billion worth of one-year papers.
A trader said in a phone interview on Friday that the movement of yields will be slightly flat with an upward bias, as market players are seen to factor in the release of the January Fed meeting minutes.
“[ The yield increase, probably] slightly flat. Around 10 basis points higher,” the trader said.
During the Federal Open Market Committee’s Jan. 30-31 monetary policy meeting, a number of officials said they had marked up their economic growth forecasts as “labor market continued to strengthen and that economic activity expanded at a solid rate.”
This supported market expectations that the US central bank will increase its rates this year.
Though the Fed officials decided not to hike interest rates at last month’s meeting, the minutes indicated that the possibility of tweaking rates is bigger.
The minutes of the January Fed meeting were welcomed by volatility in the bond and stock markets.
Ten-year US Treasury notes on Wednesday slid to 2.921% from its four-year high of 2.95% earlier that day. This prompted the Dow Jones Industrial Average index to close 166.97 points lower at 24,797.78 after climbing 303.24 points in the early session.
The government only borrowed P14.17 billion out of the P20- billion program during its offering of Treasury bills on Feb. 2 after total tenders reached P22.96 billion.
Broken down, the government borrowed P7.394 billion under the 91-day term, below the P9 billion it wanted to sell, as it received bids worth P13.024 billion.
Meanwhile, the government also raised P5 billion as planned from the 182-day securities. Offers came in at P18.902 billion, more than three times the P5 billion offered.
Lastly, the 364-day T-bills were also fully awarded at P4 billion after offers reached P12.376 billion, more than three times the offer.
At the secondary market on Friday, the three- month, sixmonth, and one- year papers fetched 2.7461%, 3.4218% and 3.6914%, respectively.
Asked on expectations for demand for the papers on offer today, the trader said the T-bills may be twice oversubscribed across the board, especially on the three-month tenor.
“So far, the T- bills auction is getting a lot of demand up to now. I’m still expecting higher demands by more than two times, especially in the short-end,” the trader said.
The Treasury plans to auction off P120 billion worth of Treasury bills and another P120 billion worth of Treasury bonds in the January to March period. This is higher than the P200 billion it offered in the last quarter of 2017.
The government borrows from local and foreign sources to fund its budget deficit, which for this year is capped at 3% of the country’s gross domestic product.
The government targets a P888.23-billion gross borrowing plan this year, 22.05% higher than last year. Of this amount, P176.27 billion will be from external financing while P711.96 billion will be sourced locally. Karl Angelo N. Vidal