Treasury officials on Tuesday sold bonds only half of what they intended to sell at this time of the year, when they need to ramp up government borrowings and have funds to underwrite the various government activities now just for now but for much longer.
Instead of selling at least P20 billion in 10-year bonds as planned, the Bureau of the Treasury (BTr) sold only a little over P10 billion no matter that the instrument attracted P32.599 billion in tenders. This developed on the week the Treasury ramped up the volume of offering from P15 billion to P20 billion
The BTr sold only P10.213 billion at the auction on Tuesday in transactions the auction committee said was aligning the rates with that of the R1 and R2 market rates. The jargon pertains to morning and afternoon bond rates in the secondary market.
According to National Treasurer Rosalia V. de Leon, the BTr decided to sell only P10.213 billion of the P20 billion on offer.
“We just aligned the rates with the R1, the P50 million transacted this morning. Otherwise, it’s really a significant increase, not only from the last auction but in terms of where we are in the R1 and R2,” de Leon told financial reporters.
R1 rates stayed at the 4.917-percent level, while R2 rates reached 4.950 percent.
“We are saying that we have a very healthy cash buffer that would also allow us to meet our requirements till the end of the year, and even going forward. So the P10 billion is something that is adequate for us,” she quickly added.
Total tenders for the IOUs reached P32.599 billion, with the committee rejecting P22.386 billion. The 10-year Treasury bond (T-bond) rate now averages 4.915 percent, or 26.8 basis points higher than previous when it averaged 4.647 percent.
The change in 10-year money also has bearing on the anticipated rate-setting meeting of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) this Thursday when the rates at which they lend to or borrow from banks was seen steady.
“And even with the 3.5-percent [headline] inflation, I don’t think that should be a cause for significant increase in the offerings today,” de Leon said.
The offering of more T-bonds by P5 billion from previous threshold of just P15 billion was meant to make up for previously canceled auctions.
“We increased the volume because we’re trying to make up for the auctions that we have canceled, not for reasons that we are trying to siphon liquidity from the system,” she reiterated.
Apart from the BSP’s term-deposit facility (TDF) auction on Thursday, the anticipated rate hike by the US Federal Reserve System (the Fed) “may have also influenced the decision of the market in terms of their bids,” de Leon said.
“There is already a very high chance that the Fed will do a rate hike with the changing of the chairmanship [from Janet Yellen] to Jerome Powell. I think those were the factors that influenced them. But even at the secondary [market], we also saw the 4.9 [-percent bond rate]. So that is a significant increase already. But I don’t think we should go beyond the secondary market,” she added.
The immediate past auction of 10-year paper was in September, when the auction committee awarded the full P15 billion, with tenders totaling P26.287 billion and rejecting another P11.287 billion.
The 10-year bond rate stood at 4.647 percent in September.