T-bill rates to climb as virus cases surge

YIELDS on Treasury bills (T-bills) on offer on Monday will likely increase further on concerns over rising coronavirus cases in the country, as this could lead investors to flock to safe havens.

The Bureau of the Treasury (BTr) wants to borrow P20 billion via its offering of T-bills on Monday, broken down into P5 billion each via the 91-day and 182-day debt papers and P10 billion from the 364-day instruments.

A bond trader expects T-bill rates to inch up by five basis points (bps) from the previous auction, while a second trader sees yields rising by 10-15 bps.

The first trader said investors are still cautious about high inflation even as they believe this is only temporary.

“BSP (Bangko Sentral ng Pilipinas) Governor [Benjamin E.] Diokno also said recently that the BSP intends to keep the market liquid to aid the recovery of the economy,” the trader said in a Viber message.

“But investors are also wary of the rising confirmed COVID-19 (coronavirus disease 2019) cases in the country. If cases continue to rise, then we might see increased demand for T-bills,” the trader added.

The Philippine Statistics Authority (PSA) earlier reported that headline inflation hit 4.7% last month, picking up from 4.2% in January and the 2.6% print in February 2020. Last month’s result also marked the fastest pace in 26 months or since the 5.1% in December 2018.

The February rate brought the two-month average to 4.5%, above the central bank’s 2-4% annual target.

Mr. Diokno last week said the central bank is unlikely to tighten monetary policy soon despite rising inflation, saying high commodity prices are due to supply issues and are only temporary.

Meanwhile, new COVID-19 cases in the country reached 5,000 on Saturday, pushing the total number of active cases to hit 616,611. The country’s death toll from the virus hit 12,766.

On the other hand, the second trader said the T-bill rates will likely rise at today’s auction as they track the climb in US Treasury yields.

The second trader added that the weakening peso could also push rates up during Monday’s auction.

“On the demand side, there is a consistent demand for T-bills,” the trader added.

The BTr last week borrowed P20 billion as planned via the T-bills from P44 billion in bids even as rates continued to increase across the board following data showing quicker February inflation.

Broken down, the BTr raised the programmed P5 billion from the 91-day debt papers as demand reached P14.467 billion. The three-month papers fetched an average rate of 1.139%, up by 9.9 bps from 1.04% logged in the previous auction.

It likewise borrowed P5 billion as planned via the 182-day T-bills from P10.915 billion in bids. The average rate for the six-month debt also went up by 9 bps to 1.316% from 1.226% previously.

Lastly, the Treasury made a full P10-billion award of the 364-day securities from tenders worth P18.62 billion. The one-year T-bills were quoted at 1.852%, up by 17.2 bps from the previous rate of 1.68%.

At the secondary market on Friday, the 91- 182- and 364-day T-bills were quoted at 1.2379%, 1.3413%, and 1.854%, respectively, based on PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

The BTr wants to raise P160 billion from the local bond market this month, broken down into P100 billion in T-bills to be offered weekly and P60 billion via fortnightly auctions of Treasury bonds.

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

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