THE Bureau of the Treasury (BTr) rejected on Tuesday all bids in its latest auction for Treasury bonds (T-bonds) as investors attempted to guess how monetary officials would move with a faster-pace inflation rate.
Deputy Treasurer Erwin D. Sta. Ana told reporters the auction committee has rejected all bids on offer P15 billion for the reissued 10-year T-bond since the average annual rate for the security would have gone up by 129 basis points if the BTr fully awarded the P12.737-billion bid.
“Bids came in much higher than what we have expected given our initial survey from the GSEDs [Government Securities Eligible Dealers] and based on where the security is actually trading on,” Sta. Ana said on September 11. “Hence the decision to fully reject.”
The average annual rate would have settled at 7.640 percent, increasing by 129 basis points, compared to the previous auction rate of 6.350 percent for the security.
“The last time we awarded for this security was May and, reasonably, there [were] already several rate increases from the Central Bank in the past couple of weeks. And the market is reportedly expecting another one from the [monetary authorities]. So, those must be taken into account,” he added.
Sta. Ana explained that investors are on a ‘wait-and-see stance’ as to what the Bangko Sentral ng Pilipinas (BSP) will do after its Monetary Board policy meeting on September 27, among others, in line with the undersubscription of the bids for the T-bond auctioned off on Tuesday.
“Well it could be several different factors but it could be that participants are still waiting for what’s [going to] happen in the next couple of days, [whether there will be] another hike. And the Fed [Federal Reserve System] is also moving this month, I mean that is based on the report,” he said. “Maybe they are just waiting for other events.”
Monetary authorities in August announced a 50-basis-point hike to their overnight reverse repurchase interest rate. The hike also came on the heels of two 25-basis- point hikes made in the May and June monetary-policy meetings of the BSP, making it the third consecutive meeting for the year with a rate hike action from the country’s central monetary authority.