T-bill rates may inch higher amid weak demand

Rates of Treasury bills (T-bills) to be auctioned off this week could inch up on expectations of weaker demand amid the government’s ongoing retail bond offering.

The Bureau of the Treasury (BTr) will auction off P15 billion in T-bills on Monday, or P5 billion each in 91-, 182-, and 364-day papers.

The auction of reissued 10-year Treasury bonds (T-bonds) scheduled on Tuesday was canceled due to the retail bond offering.

Rates of the T-bills on offer this week could track the slight increase in secondary market yields as the ongoing retail Treasury bond (RTB) offering could siphon off cash from the financial system, resulting in weaker demand, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

At the secondary market on Friday, the rates of the 91-, 182-, and 364-day T-bills went up by 10.94 basis points (bps), 5.02 bps, and 2.14 bps week on week to end at 5.5704%, 5.8597%, and 6.0791% respectively, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

The government on Tuesday raised an initial P212.719 billion from the five-year RTBs. Tenders for the retail papers at the rate-setting auction reached P272.708 billion, or more than nine times the P30 billion on offer. The retail bonds fetched a coupon rate of 6.25%.

The public offer period for the RTBs and submission of bond exchange offers began on Tuesday and is scheduled to end on Feb. 23, unless closed earlier by the Treasury. The new retail bonds will be issued and settled on Feb. 28.

Rates on government debt traded at the secondary market rose last week amid market expectations of a rate cut by the US Federal Reserve in June, Mr. Ricafort added.

The Fed raised borrowing costs by 525 bps from March 2022 to July 2023 to the 5.25-5.5% range.

On Friday, market expectations the Fed will start cutting rates in June were dialed back, with CME’s FedWatch Tool now showing a 69.9% chance for a cut of at least 25 bps, down from the nearly 90% in the prior session, Reuters reported.

Last week, the BTr raised P17 billion from its offering of T-bills, higher than the programmed P15 billion, as total bids reached P49.292 billion, or more than thrice the amount on the auction block.

Broken down, the Treasury made a full P5-billion award of the 91-day papers as tenders for the tenor reached P10.72 billion. The average rate of the three-month T-bill rose by 4.5 bps from the previous week to end at 5.506%. Accepted rates ranged from 5.475% to 5.55%.

The government also raised P5 billion as planned from the 182-day securities as bids stood at P15.79 billion. The average rate for the six-month T-bill was at 5.879%, up by 1.8 bps week on week, with accepted rates at 5.858% to 5.895%.

Lastly, the BTr borrowed the programmed P7 billion via the 364-day debt paper, higher than the P5-billion program, as demand for the tenor totaled P22.782 billion. The average rate of the one-year T-bill fell by 1.1 bps to 6.064% from last week. Accepted yields were from 6.048% to 6.075%.

The BTr plans to raise P210 billion from the domestic market this month, or P60 billion via T-bills and P90 billion through T-bonds. It previously wanted to borrow P150 billion from bonds but canceled two scheduled auctions of long-tenored papers due to the RTB offering.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.1% of gross domestic product this year or P1.39 trillion. — A.M.C. Sy with Reuters