Reissued 20-year T-bonds undersubscribed, rates up

MANILA, Philippines - The Bureau of the Treasury (BTr) rejected yesterday all bids for the reissued 20-year Treasury-bonds as the market required high rates for the securities ahead of the US Federal Reserve’s meeting this week.

During yesterday’s auction, bids for the P15 billion T-bonds with remaining life span of 19 years and 10 months fetched an average rate of 5.244 percent, 20.9 basis points higher than the previous rate of 5.035 percent.

It was likewise higher than the secondary market rates for the same securities, which was recorded at 5.1575 percent before the auction closed.

The auction was undersubscribed, with tenders amounting to only P11.202 billion.

According to National Treasurer Rosalia de Leon, the average rate for the T-bond auction was “unreasonably high” and was not within the expectations of the Bureau.

“When we did the market survey, I think we’re looking at a five to 10 basis points (increase), and they (the traders) have indicated that it would be oversubscribed by five or two,” De Leon said.

“Apparently, there’s no demand for the 20-year (T-bonds) right now in spite of the very low inflation expectations, and there’s also ample liquidity,” she said.

De Leon said the muted demand from investors for both long-term and short-term securities reflects the wait-and-see attitude the market has adopted pending the meeting of the US Federal Open Market Committee.

“Maybe it’s really a wait-and-see for investors right now as the US is going to have the Fed meeting on the 25th and the 26th. They’re waiting on the sidelines on what will be the Fed decision,” she said.

Despite failing to raise money from the auction, De Leon assured that the government still has a healthy cash position, which gave it the leverage to reject the bids.