Rates of T-bills to move sideways on RTB

THE RATES of Treasury bills (T-bills) to be auctioned off on Monday will likely move sideways due to the ongoing offering of three-year retail Treasury bonds (RTBs).

The Bureau of the Treasury (BTr) is looking to borrow P20 billion via the T-bills on Monday: P5 billion each from the 91- and 182-day debt papers and P10 billion via the 364-day securities.

A bond trader said the yields on the short-term debt will move sideways or dip by 5 basis points (bps) as the market continues to monitor the government’s ongoing RTB sale.

“The total volume issued for the RTB will be closely monitored so some investors may decide to place liquidity in shorter tenors such as T-bills for now,” the trader said via Viber over the weekend.

ATRAM Trust Corp. Head of Fixed Income Jose Miguel B. Liboro likewise said the auction will continue to see strong reception but total bids may come in lower than previous exercises as some investors may choose to subscribe to the three-year RTBs instead.

The Treasury last week hiked the volume of the T-bills it awarded as rates continued to decline across the board.

The BTr borrowed P24 billion via the T-bills on Monday, higher than its initial plan to raise P20 billion, after it accepted more non-competitive bids for the three-month and six-month papers.

Total tenders reached P95.35 billion, making Monday’s offering nearly five times oversubscribed. However, this was smaller compared with the P103.65 billion in bids seen during the previous week’s auction.

Broken down, the BTr raised P7 billion via the 91-day T-bills, more than the P5-billion program, as tenders hit P21.6 billion. The three-month papers fetched an average rate of 0.846%, down by 7.1 bps from the 0.917% seen previously.

The government also borrowed P7 billion from the 182-day papers versus the P5-billion plan, with bids reaching P29.834 billion. The average rate of the six-month papers went down by 11.6 bps to 1.094% from the previous week’s 1.21%.

Lastly, the Treasury made a full P10-billion award of the 364-day securities on the auction block out of total tenders worth P43.915 billion. The one-year instruments were quoted at an average yield of 1.446%, down 4.6 bps from the 1.492% fetched at the previous offering.

At the secondary market, the 91-, 182- and 364-day T-bills were quoted at 0.974%, 1.149%, and 1.432%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the government sold an initial P221.218 billion in three-year RTBs during the rate-setting auction on Feb. 9 as total bids reached P284.183 billion.

The bonds fetched a coupon rate of 2.375%, 200 bps lower than the 4.375% rate quoted for the RTBs sold in February 2020. The offering is set to run until March 4, unless closed earlier.

“We expect demand to remain strong. Still too early to tell whether it will be able to surpass the previous 5yr RTB (RTB 5-13) as the largest issuance ever, but it has had a very strong start,” Mr. Liboro said via e-mail.

“Despite fears of rising inflation, the BSP (Bangko Sentral ng Pilipinas) remains unlikely to raise policy rates anytime soon and investors will continue to see the 2.375% coupon level as attractive given current levels and alternatives in the market,” he added.

The BSP kept benchmark rates unchanged at record lows at the first policy-setting meeting of the Monetary Board last Thursday to support the economy’s recovery.

The central bank maintained the overnight reverse repurchase rate at a record low of 2%. The lending and deposit facilities were likewise kept at 2.5% and 1.5%, respectively.

The BTr plans to borrow P110 billion from the local debt market this month: P80 billion via weekly auctions of T-bills and P30 billion from a Treasury bond offer. It canceled a previously scheduled bond auction for its RTB offering.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga