T-bill rates to move sideways on strong liquidity

t bill rates to move sideways on strong liquidity - T-bill rates to move sideways on strong liquidity

TREASURY BILLS (T-bills) on offer this week will likely see their rates move sideways as investors remain awash with cash and amid improved economic prospects here and abroad.

The Bureau of the Treasury (BTr) will auction off T-bills worth P20 billion on Monday: P5 billion each in 91-day and 182-day papers and P10 billion in 364-day papers.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the rates may end close to the levels seen in the previous auction amid ample liquidity among investors.

“T-bill rates will likely be trapped in a tight range with the bevy of liquidity in the system and dearth of investment outlets for the Philippine financial markets,” Mr. Mapa said in an e-mail.

Meanwhile, a trader said in an e-mail that yields on the T-bills may inch up to track US Treasury rates amid improving economic prospects following the projected victory of Democratic candidate  Joseph R. Biden, Jr. in the US presidential election.

The BTr last week raised P22 billion via the T-bills, more than the P20 billion on the auction block, as the offer was almost five times oversubscribed, with bids amounting to P96.727 billion.

Broken down, the BTr borrowed P5 billion as planned from the 91-day papers as tenders reached P24.987 billion. The three-month debt fetched an average rate of 1.058%, inching down by 2.1 basis points (bps) from the 1.079% logged in the previous auction.

Meanwhile, the Treasury awarded P7 billion in 182-day T-bills, more than the P5-billion program, as tenders amounted to P31.12 billion, prompting the government to accept more bids from the non-competitive sector. The six-month securities were quoted at an average rate of 1.499%, declining by 4.4 bps from 1.543% in the previous offering.

The government also awarded the programmed P10 billion in 364-day debt papers as bids reached P40.62 billion. The one-year T-bills fetched an average rate of 1.759%, lower by 3.2 bps from the 1.791% quoted at the previous week’s auction.

The Treasury also opened its tap facility to borrow another P5 billion via the one-year papers as it sought to take advantage of the strong demand and low rates.

At the secondary market on Friday, the 91-day, 182-day and 364-day T-bills were quoted at 1.106%, 1.503% and 1.777%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, investors and financial executives took a big sigh of relief on Saturday after major networks declared Mr. Biden winner of the US presidential election, offering some certainty after days of conflicting reports about who might run the White House next term, Reuters reported.

Although current President Donald Trump said he would fight the results in court, Wall Streeters who offered comments felt there was little doubt Biden would ultimately succeed. Election predictors including the Associated Press, NBC, Fox News and Edison Research, upon which Reuters relies, called the presidency for Biden.

Major US stock indexes registered their biggest weekly gains since April last week, as investors bet Mr. Biden would win and Republicans would hold onto the Senate. That scenario would create a steadier hand in the Oval Office and a Congress that would check left-leaning impulses on taxes or regulations that pinch companies, investors said.

However, there are lingering risks to asset prices in the days and weeks ahead.

Republicans have already filed several lawsuits over ballot counting and Mr. Trump said his campaign will file more. The litigation could drag out election proceedings.

Investor focus also now turns to the Senate, which remains undecided ahead of two runoff elections in Georgia on Jan. 5.

Beyond those battles, investors have been worried about the people Mr. Biden might appoint to his Cabinet. Some of those officials would be negotiating with Congress about a relief package and have extensive powers to craft Wall Street rules.

The Treasury plans to borrow P140 billion from the domestic market this month: P80 billion in weekly T-bill auctions and P60 billion in fortnightly Treasury bond auctions.

It will also offer another tranche of Premyo bonds on Wednesday to raise at least P3 billion. The offer period is set to run from Nov. 11 to Dec. 18.

Premyo bonds are part of the government’s bid to attract more small investors to invest in government securities. Last year, the BTr raised P4.961 billion from the sale of one-year peso-denominated Premyo bonds, up from its initial offer of P3 billion.

Premyo bonds are government securities that have corresponding raffle numbers for cash and non-cash prizes, aside from earning interest. The minimum investment for the bonds stands at just P500 and can be bought in multiples. One Premyo bond is equivalent to one raffle ticket.

The government wants to raise around P3 trillion this year from local and foreign lenders to help fund its budget deficit, which is expected to hit 9.6% of the country’s gross domestic product. — K.K.T. Jose with Reuters

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