MANILA -- The Bureau of the Treasury’s (BTr) auction committee on Tuesday rejected all bids for the seven-year Treasury bond (T-bond) after investors asked for high yields on expectations of further hikes in interest rates in the near term.
BTr offered the debt paper for PHP15 billion but tenders amounted to only PHP13.965 billion, which National Treasurer Rosalia De Leon said are “throw away bids”.
She said market players are awaiting the Monetary Board's (MB) next move when it convenes again on August 9, to possibly follow up on the 50 basis points increase in key rates this year. This was implemented in two tranches of 25-basis points each last May and June.
To date, the BSP’s overnight reverse repurchase (RRP) rate is at 3.5 percent.
Another reason for the undersubscription is the wait-and-see stance ahead of Federal Reserve Chair Jerome Powell’s testimony before a committee of the US Senate later in the day, De Leon said.
“It’s a wait-and-see (situation) so nobody wants to lock-in,” she told reporters after the auction.
Analysts expect two more rate hikes from the Fed in the remaining months of 2018 following the 25 basis points increase each last March and June, which brought the current key rates to between 1.75 to two percent.
The Fed was earlier expected to implement three rate increases this year.
Minutes of the Fed’s policy meeting last June showed that US policy makers remain optimistic on the sustained growth of the world’s largest economy.
Analysts have noted that Fed officials have repeatedly indicated the need for gradual policy rate increases but also cited that risks remain, including the impact of the Trump administration’s trade policy. (PNA)
