RATES of the Treasury bills (T-bills) to be offered this week may move sideways, with ample demand seen for shorter tenors even amid the ongoing public offer of the new 10-year benchmark bonds.
The Bureau of the Treasury (BTr) will auction off P25 billion in T-bills on Monday, or P8 billion each in 91- and 182-day papers and P9 billion in 364-day debt.
The government canceled the April 22 auction of 15-year Treasury bonds (T-bonds) amid its offering of new 10-year fixed rate Treasury notes (FXTN).
The first trader said in a text message that the T-bills on offer on Monday could fetch “steady to lower” yields. “We expect the short end to belly of the curve to have strong support on the lack of supply pressure.”
This comes as the 10-year FXTN offer has attracted “strong demand,” the trader said.
“With this, there will be less pressure for BTr to borrow aggressively next month and gives them time to wait for the market to reflect the recent rate cut.”
The second trader added that the jumbo offering of the new 10-year benchmark bonds caused most secondary market yields to close sideways to lower at the end of trading last week before the trading break.
At the secondary market on Wednesday, the 91- and 182-day T-bills rose by 4.32 basis points (bps) and 1.28 bps week on week to fetch 5.4133% and 5.6308%, respectively. Meanwhile, the 364-day debt fell by 9.63 bps to yield 5.6841%.
The BTr raised an initial P135 billion from the new 10-year fixed-rate Treasury notes it auctioned off last week, more than four times the initial P30-billion offering, as tenders reached P197.3 billion.
The new 10-year bonds fetched a coupon rate of 6.375%, resulting in an average rate of 6.286%. Accepted yields ranged from 6% to 6.4%.
The public offer period for the bonds, targeted towards institutional investors, is scheduled to end on April 24, unless closed earlier.
Meanwhile, the Monetary Board on April 10 cut benchmark interest rates by 25 bps to bring the policy rate to 5.5%, putting its easing cycle back on track after an unexpected pause in February.
The central bank has now reduced borrowing costs by a cumulative 100 bps since it kicked off its rate-cut cycle in August last year.
Last week, the BTr raised P25 billion as planned from the T-bills it auctioned off as total bids reached P74.512 billion or nearly thrice the amount on offer.
Broken down, the Treasury borrowed the programmed P8 billion via the 91-day T-bills as tenders for the tenor reached P13.387 billion. The three-month paper was quoted at an average rate of 5.422%, up by 2.9 bps week on week.
The government likewise made a full P8-billion award of the 182-day securities as bids for the paper amounted to P28.525 billion. The average rate of the six-month T-bill climbed by 1.2 bps to 5.657%.
Lastly, the Treasury raised P9 billion as planned via the 364-day debt papers as demand for the tenor totaled P32.6 billion. The average rate of the one-year T-bill slipped by 0.4 bp to 5.722% from 5.726% previously.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.54 trillion or 5.3% of gross domestic product this year. — AMCS
