MANILA -- The Bureau of Treasury’s (BTr) auction committee on Tuesday rejected all bids for the 10-year Treasury bond due to undersubscription and demand for high yields.
It offered the debt paper for PHP15 billion but total tenders only amounted to PHP12.737 billion. Had the auction committee accepted the bids, the rate of the debt paper would have risen to 7.640 percent from its previous rate of 6.350 percent. The rate of the same tenor in the secondary market Tuesday morning stood at 7.4714 percent.
Deputy Treasurer Erwin Sta. Ana told reporters after the auction that the rates turned out higher than they expected, thus, the rejection.
The BTr last offered this tenor in May and Sta. Ana said the increase in rates sought by investors are reasonable since the Bangko Sentral ng Pilipinas (BSP) has hiked its key rates. “And market is reportedly expecting another one from the central bank so those must be taken into account,” he said.
The BSP’s policy-making Monetary Board (MB) will have its next rate setting meet on Sept. 27, wherein it is widely expected to announce another rate adjustment as a reaction to August's 6.4 percent inflation spike. To date, the BSP’s policy rates have been increased by a total of 100 basis points.
Analysts are also expecting another increase in the Federal Reserve’s key rates after the meeting of the Federal Open Market Committee (FOMC) on Sept. 25-26, the BTr official said.
Sta. Ana is not worried about the impact of Tuesday’s rejection on government’s finances, saying the auction committee has been awarding in full - in most of auctions - T-bond and Treasury bills (T-bills) this year. “At the same time, we still have sufficient buffer because of all these impressive revenue collections. So, we are okay,” he said.
Sta. Ana said the last time they rejected bids for government securities was in July, for a 10-year T-bond.
On Monday, the auction committee made a partial award for the 91-day T-bill after banks asked for high yields.
Meanwhile, Sta. Ana said they continue to monitor developments overseas to properly assess the correct timing for the planned US dollar-denominated bond later this year, the second for the country this 2018. “And we are still waiting for the authority of the President, basically so from the approval standpoint. So, after that if there’s clear market, there’s opportunity to go out, we will,” he added. (PNA)
