The Bureau of the Treasury (BTr) has rejected all bids in its latest Treasury bonds (T-bonds) auction as investors sought high rates for the debt paper.
National Treasurer Rosalia V. de Leon told reporters on Tuesday that the auction committee rejected all bids for the reissued seven-year T-bonds with P15 billion on offer on the back of high rates given by investors for the security apart from undersubscription of bids.
“Well it’s really outrageous, the pricing they are offering to us. And it’s undersubscribed at P13 billion only,” de Leon said. “So most of those are really throwaway bids.”
Bids for the T-bonds only reached P13.965-billion short of the P15 billion on offer. If the BTr awarded the full P13.965 billion, rates would have settled at 6.621 percent, expanding by 64.5 basis points from the previous auction’s annual average rate of 5.976 percent.
De Leon explained the high rates sought by the market may be in line with moves to add some cushion so investors can withstand shocks in anticipation of further rate hikes expected from both the Federal Reserve System (the Fed) and the Bangko Sentral ng Pilipinas (BSP).
“Obviously, it’s already wait and see on the coming August 9 policy meeting [of the Monetary Board]. And everybody is also waiting for [Fed Chairman Jerome] Powell’s testimony tonight [on] what would be the move of the Fed,” she added. “So it’s a wait and see; nobody would also want to be locked-in already at seven years [or the] intermediate part of the curve.”
Bid rates for the security was also higher than the secondary market (R2) rates, which closed in the afternoon, settling at 6.362 percent.
The country’s Monetary Board will have its fifth policy meeting on August 9.
In June the BSP hiked its rates anew in its fourth monetary-policy meeting in an effort to lockdown rising inflationary pressures. Monetary authorities first hiked main policy rates by 25 basis points in May, the first rate hike since 2014.
The rejection of bids lowered the tenor of the reissued seven-year T-bonds to six years and eight months. For the third quarter of the year, the national government intends to issue a total of P105 billion worth of T-bonds.