BTr rejects bids for 7-year T-bond

The government on Monday issued a total of PHP255.4 billion-worth of RTBs, higher than the initial offering of PHP30 billion. (Photo Bureau of the Treasury/Facebook)

MANILA — The Bureau of the Treasury’s (BTr) auction committee rejected all bids for the seven-year Treasury bond Tuesday due to lower demand as banks asked for high yields.

BTr offered the debt paper for PHP20 billion but tenders only reached PHP4.39 billion.

National Treasurer Rosalia De Leon told reporters after the auction that there was no reason for the Committee to accept the bids after rates rose to above 4.75 percent, higher than the 4.625 percent fetched by the recent Retail Treasury Bond (RTB) issuance of the government.

The government on Monday issued a total of PHP255.4 billion-worth of RTBs, higher than the initial offering of PHP30 billion.

BTr also rejected bids at high rates because of inflation expectations. The Bangko Sentral ng Pilipinas (BSP) forecast an average of 3.2 percent inflation this year.

Last November, inflation slowed down to 3.3 percent from month-ago’s 3.5 percent, resulting an average of 3.2 percent to date, within the government’s two to four percent target for 2017-19.

“And then at the same time BSP also reduced the volume for the 28 TDF (Term Deposit Facility) to PHP40 (from PHP90 billion offering previously) so there would still be additional liquidity to be used by the financial system,” she said.

De Leon attributed banks’ decision to ask for high rates to expectations of higher rates in the US, with the Federal Reserve projected to hike rates during the meeting of the Federal Open Market Committee (FOMC) on Dec. 12-13, 2017.

De Leon said auctions of government securities (GS) would continue until Dec. 19 even after the RTB issuance, pointing out that it was clearly mentioned to the banks that proceeds of the RTB is part of the government’s funding for 2018.