MANILA -- The Bureau of the Treasury’s (BTr) auction committee on Tuesday rejected all bids for the seven-year Treasury bond (T-bond) despite the high demand after investors asked for yields that were deemed too high.
Had the auction committee made a full award of PHP15 billion, rate of the debt paper would have risen to 8.284 percent, 119.9 basis points higher than the 7.085 percent it fetched during the auction last September 25.
Deputy Treasurer Erwin Sta. Ana said “bids came in unreasonably high.”
Demand for high yields came with large tenders amounting to PHP24.456 billion.
Sta. Ana traced the strong demand to anticipations of higher liquidity since about PHP11 billion worth of debt papers will mature this week. “And then, it’s already an interesting proposition to go back to GS (government securities) because of the increasing rates,” he said, citing feedbacks they have received from investors.
In recent weeks, the BTr auction committee has been rejecting some bids primarily due to demand for high yields. Asked if this will be the new normal for the agency, Sta. Ana said the decision is being made on a per auction basis “because we always look at how the array is actually laid out.”
“So it’s not a conscious effort for us to continue to reject as long as we have enough cash but rather we are really looking at each bid submission,” he said.
In terms of the impact of these rejections on government’s financing program, the BTr official said they have other sources of funds, such as the planned issuance of US dollar-denominated bond and retail treasury bond. “We are looking to do some floaters so we are structuring some floating rate notes now,” he said, citing that floater rate notes benefit the banks the most “because that would actually give them some protection with respect to changes in interest rates.”
“So we think there is going to be a demand for floating rate notes at this time,” he added. (PNA)
