High rates prompt rejection of T-bond bids

The Bureau of the Treasury (BTr) yesterday rejected all bids worth P14.91 billion for reissued five-year Treasury bonds (T-bonds) as traders asked for higher rates amid expectations of further policy tightening in the country.

Had the auction committee decided to make a full award, the securities would have fetched an average rate of 5.98 percent, 38.8 basis points higher than the 5.592 percent recorded in the previous auction.

After the auction, National Treasurer Rosalia de Leon told reporters the BTr decided to reject all bids due to high rates. She said the market may already be pricing in possible rate hikes by the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.

“Investors are still looking at more rate hikes coming from the BSP and the US Fed. So they are putting more cushion in terms of the yields they are submitting,” De Leon said.

The national treasurer said the BTr still has the flexibility to reject bids and give out partial awards due to the good cash position of the government.

“We still have a very strong cash buffer coming from the RTB (retail Treasury bond), and also from the revenue collections. The BIR (Bureau of Internal Revenue) and BOC (Bureau of Customs) are really doing very well, they have exceeded the target,” she said.

Due to strong revenue collections from both agencies, De Leon said the fiscal deficit remains manageable in spite of above-target disbursements.

“So that also gives us room to maneuver, not to really accede to the high rates or high yields we are seeing,” De Leon said.

The BTr chief said this would also give the national government room to adjust its borrowing program for the rest of the year.

“We have to calibrate that because we are also seeing good collections. That means we can afford also to reduce our borrowing program for the rest of the year, taking into consideration of course our rejections,” she said.

According to Treasury data, government revenue in the first five months rose 19 percent to P1.19 trillion from the P996.5 billion in the same period last year.

This was seven percent higher than the programmed revenue for the period, which was originally projected at P1.105 trillion.

Meanwhile, expenditures during the five-month period grew by 25 percent to P1.33 trillion from P1.06 trillion in the same period last year. The figure was P15.2 billion higher than the spending program of P1.31 billion for the period.