Treasury bill rates seen sideways

YIELDS on Treasury bills (T-bills) to be auctioned off today will likely move sideways amid consolidation as they track US rates and with demand expected to be strong on the short tenors ahead of a likely Federal Reserve hike.

The Bureau of the Treasury will offer today P15 billion in shorter-dated securities, aiming to borrow P6 billion via the three-month papers, P5 billion in six-month papers, and P4 billion in the one-year tenor.

Bond traders interviewed separately on Friday said the Treasury’s offer will likely be twice oversubscribed, with demand for the shorter-tenored papers likely to be strong.

A trader said the auction may see yields rise by five basis points (bps) across the board from rates fetched at the last auction to track US debt notes.

“Rates will move sideways, but may already increase to about five basis points higher, but tenders will still be more or less times two because the market will still tend to go into shorter papers,” the trader said in a phone interview.

“There’s still demand, but the yields may go higher because US treasuries are also higher, given the chances of a interest rate hike come December in the US. Now, there’s about a 74% chance of a rate hike because of the strong economic numbers recently,” the trader added, noting hawkish comments from Fed officials in separate speaking engagements.

At the Sept. 25 auction, the 91-day T-bills fetched an average rate of 2.032%, while the 182-day and 364-day papers were quoted at 2.522% and 2.861%, respectively.

Meanwhile, at the secondary market on Friday, the 91-day and 182-day T-bills were respectively quoted at 2.8286% and 2.9175% at the close of trading, while the one-year papers yielded 2.853%.

A second trader said that although there will be an eventual rise in rates, today’s yields may be mostly flat given the lesser number of T-bill offerings in the fourth quarter due to the holidays.

“Investors are watching closely the availability of the T-bills, because they want to invest in shorter-tenored papers,” the second trader said in a phone interview.

“I think there’s still strong demand on short-dated tenors, so we can expect another drop on five basis points on the three months, but not so much coming to the one-year. Yields are maybe going to be flat and the volume offer won’t be too big,” the second trader added.

The trader also noted that the higher-than-expected 3.4% headline inflation in September could boost demand for the government securities on offer.

The government is planning to raise P150 billion from domestic lenders in the fourth quarter — lower than the P195 billion programmed in the third quarter — offering P75 billion each in T-bills and Treasury bonds. — E.J.C. Tubayan