Rates of Treasury bills to move sideways on lack of fresh leads

RATES of the Treasury bills (T-bills) on offer on Monday will likely move sideways and track US yields amid the lack of fresh leads.

The Bureau of the Treasury (BTr) is looking to raise P25 billion via its offer of Treasury bills (T-bills) on Monday, broken down into P5 billion from the 91-day securities, P8 billion via the 182-day debt and P12 billion in 364-day papers.

A bond trader said the yields of the T-bills will move sideways with a slight upward bias at Monday’s auction.

“For the factors to consider, the market looks at the movement of the US Treasury. On the T-bills, there is still strong demand to persist on the lack of fresh leads,” a trader said by phone on Friday.

US Treasury yields slid on Friday as the market shrugged off a report showing US factory activity rose in early May to its highest level in more than a decade and Federal Reserve officials talked about when to discuss tapering bond purchases, Reuters reported.

Data firm IHS Markit said its flash US manufacturing PMI increased to 61.5 in the first half of this month, a reading that was the highest since the survey was expanded in October 2009 to cover all manufacturing industries.

The IHS report is the latest news to show the US economy is roaring at the “highest” level or “largest” advance in some time, suggesting inflation is picking up more than the Fed would likely acknowledge, said Kevin Flanagan, head of fixed-income strategy at WisdomTree.

The yield on 10-year Treasury notes was down 0.9 basis point to 1.625%, well off a more than one-year high of 1.776% reached in late March.

The yield on the 30-year Treasury bond fell 1.2 basis points to 2.329%.

Minutes from the April meeting of Fed policy makers released on Wednesday revealed a contingent within the US central bank that feels a discussion may start sooner than expected about pulling back its accommodative monetary policy, Mr. Flanagan said.

The government last week fully awarded the T-bills it offered as rates dipped amid lower inflation expectations.

The BTr raised P25 billion as planned via the T-bills on Monday, with total tenders reaching P83.705 billion, making the offer over three times oversubscribed.

Broken down, the Treasury awarded the programmed P5 billion in 91-day T-bills as total bids reached P16.965 billion. The three-month papers fetched an average rate of 1.27%, a tad lower than the 1.278% seen previously.

The BTr also borrowed P8 billion as planned via the 182-day debt papers after the tenor attracted P25.11 billion in tenders. The average rate of the six-month debt dipped to 1.54% from 1.549% previously.

Lastly, the government made a full P12-billion award of the 364-day instruments as demand reached P41.63 billion. The one-year T-bills were quoted at 1.81%, down by 1.9 basis points from the previous rate of 1.829%.

The Treasury also opened its tap facility to raise another P5 billion via the 364-day papers to take advantage of the strong appetite for the tenor that caused its yield to drop.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills were quoted at 1.3045%, 1.5436%, and 1.8385% respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The Treasury wants to raise P170 billion from the local bond market this month: P100 billion via weekly offerings of T-bills and P70 billion from T-bonds to be auctioned off fortnightly.

The government is looking to borrow P3 trillion this year from domestic and external sources to help fund its budget deficit seen to hit 8.9% of gross domestic product. — with Reuters