BTr rejects bids for 7-yr T-bonds

The Bureau of the Treasury (BTr) rejected Tuesday all bids for seven-year Treasury bonds (T-bonds) as the market asked for high rates amid developments in the global market.

During Tuesday’s auction, the BTr decided to reject all tenders for the debt papers maturing in seven years after submitted rates averaged 5.009 percent, 61.9 basis points up from the 4.39 percent posted last Oct. 18.

Total tenders amounted to P4.3 billion, falling short of the P20 billion initial offering.

Asked to comment why the auction committee rejected bids, National Treasurer Rosalia de Leon said traders asked for high rates despite a lower inflationary environment and ample liquidity in the market.

“There is really no reason at all for the very big increase in the rates, given... the lower inflation. And then at the same time, the BSP (Bangko Sentral ng Pilipinas) also reduced the volume of the 28-day TDF (term deposit facility) to P40 billion, so there would still be additional liquidity in the financial system,” she said.

However, De Leon acknowledged rates during the auction could have also been affected by developments in the global market, such as the US Senate’s approval of President Donald Trump’s tax reform plan.

She said the market may also be considering the high probability of a rate hike to be implemented by the US Federal Reserve.

“On the other hand, (there are) expectations in the US rate increase and the tax reform plan, which was approved in the US Senate. Those are the offsetting factors why they are also asking us for a higher rate,” she added.

The treasurer said the auction may have also been undersubscribed given the recent issuance of P255.4 billion worth of retail Treasury bonds (RTB) on Monday.

“Maybe they feel that after the RTB settlement (on Monday) then we will not be accepting high bids if they are going to submit beyond 4.75 percent. So it would be like a throw-away bid,” she said.