BTr rejects all bids for 7-year T-bonds

The Bureau of the Treasury (BTr) rejected yesterday all bids for seven-year Treasury-bonds as traders asked for higher rates following the notable increase in inflation rate for January.

During yesterday’s auction, the Treasury decided not to accept all bids for debt papers maturing in seven years after the market submitted rates averaging 5.273 percent.

This was 88.3 basis points higher than the 4.39 percent average rate posted during the previous auction for the same securities.

Total tenders amounted to P25.824 billion, slightly higher than the original offering volume of P20 billion.

Sought for comment, National Treasurer Rosalia de Leon said the auction committee decided on a withdrawal because the interest rates asked by traders went beyond the accepted threshold of the Treasury.

“We see that their rates are really way beyond our estimates, of the reasonable rates that we expect for this tenor, for this new issuance,” De Leon said, without providing the exact figure on the internal estimates of the bureau.

According to the official, the higher-than-expected bid rates seen during yesterday’s auction could be attributed to the surge in inflation recorded in January 2018.

Inflation settled at four percent in January, the highest since October 2014 when inflation leaped to 4.3 percent.

This is also higher than the 3.3 percent posted in December 2017 and 2.7 percent in January last year.

Aside from the high inflationary environment, De Leon said government securities eligible dealers (GSEDs) may have also priced in their expectations of a possible rate hike during the Monetary Board’s meeting tomorrow.

Despite the rejection of new money, De Leon said the Philippine national government remains in a good cash position considering the fund raising activities conducted by the BTr late last year and in January this year.

“We have a very strong cash buffer. That’s something that we have because of our preparations in the early days when we saw that rate environments are still appropriate for us to raise enough for this year,” she said.