Government rejects all bids for T-bills

MANILA, Philippines — The government rejected bids for Treasury bills (T-bills) during yesterday’s auction after investors asked for higher interest rates.

All bids on offer, worth P15 billion, were rejected by the Bureau of the Treasury, marking the second consecutive week that the agency rejected bids for T-bills.

Further, demand for the securities reached P21.234 billion, oversubscribing the auction by 1.42 times and rising by about 15 percent from P18.542 billion a week ago.

Had the auction committee accepted the bids, yields for the 91-day T-bills would have spiked by 40.8 basis points to 1.577 percent, while that of the 182-day T-bills would have risen by 71.8 basis points to 1.967 percent. The three-month debt papers fetched P7.61 billion in bids, as the six-month program attracted just P6.459 billion.

On the other hand, rates for the 364-day T-bills would have risen by 34.9 basis points to 1.943 percent against the market average. Demand for the full-year securities hits P7.165 billion.

National Treasurer Rosalia de Leon said investors went to the auction seeking extra protection for their capital due to risks posed by the ongoing conflict between Ukraine and Russia.

Also, De Leon said the debt market has already priced in the impact of the geopolitical tension on the value of the peso and the projected increase in basic commodity prices.

“Full rejection of all tenors as markets continue to ask for higher risk premium, with deterioration in market sentiment due to escalating tension in Ukraine, weakening of peso, and expected surge in inflation,” De Leon said in a text message to reporters.

She admitted the government faces a dilemma on where to source its financing needs. On one hand, investors may pressure the Treasury to give in to their asking yields beyond market pricing to cover for threats, particularly inflation.

On the other hand, the government can go to offshore markets if it can no longer afford the domestic rates.

However, de Leon said the overseas debt market would be the first to suffer if the US Fed decides to raise its interest rates to tame inflation.

US inflation swelled to a 40-year high of 7.5 percent in January, forcing the Fed to assess a rate hike in March.

The Treasury plans to borrow a total of P250 billion from the domestic market in March, but has yet to raise anything from the auction of both short-dated and long-term bonds.