BTr rejects all bids for 5-year T-bonds

MANILA, Philippines – The Bureau of the Treasury rejected yesterday all bids for the five-year Treasury bonds as banks offered unreasonably high rates.

Investors were charging the bond, with a remaining life of three years and eight months, 4.358 percent, higher than the 4.198 percent in the secondary market.

“I think the market is still quite unsettled because of what is being anticipated for the (US) Fed,” National Treasurer Roberto Tan told reporters after the auction.

“It will be better to come up with a bond issuance...when the market already absorbed and digested the Fed decision,” Tan said.

T-bonds are investment instruments given locally to borrow funds at a particular rate and payment period. Higher yields are disadvantageous for the government since it will have to set aside more funding for debt payment.

“Rates that are being bid out are quite off the market rates. So we decided to just reject. We would have liked to accommodate, following the direction but this might send the wrong signal,” Tan said.

Sought for comment, a bond trader at a local bank also pointed to the higher inflation rate for November as a reason for the unreasonably high rates.

Inflation, as measured by consumer price index, hit a near two-year-high of 2.5 percent last month from 2.3 percent in October.

It brought the 11-month rate to 1.7 percent, still below the two- to four-percent target for the year.

“There is an expected normalization of inflation as a result of recovering oil prices and weaker peso, plus the higher government spending plans,” the trader said in a phone interview.

The government is planning to borrow P505.06 billion from the domestic market next year to finance the budget deficit capped at P478.1 billion and pay existing debts.

Broken down, it covers P280 billion in shorter-dated Treasury bills and P465.04 billion in T-bonds.

“By second week next year, the market is already quiet, the uncertainty has been reduced drastically,” Tan said.