THE GOVERNMENT on Tuesday rejected all bids for its offer of reissued seven-year Treasury bonds (T-bonds) as investors asked for high rates despite easing inflation.

The Bureau of the Treasury (BTr) did not accept any tenders for the reissued securities, which have a remaining life of six years and eight months.

It rejected all offers even as tenders reached P52.267 billion, more than twice the P20 billion on offer. However, this was lower than the P57.215 billion in bids fetched the last time the bond series was sold on Oct. 26.

Had it fully awarded its offer, the reissued seven-year bonds’ average yield would have declined by 7.3 basis points to 4.395% from the 4.468% fetched the last time the series was offered.

This would also have been lower than the 4.5425% quoted for seven-year bonds at the secondary market before the auction, based on PHP Bloomberg Valuation Service Reference Rates posted on the Philippine Dealing System’s website.

National Treasurer Rosalia V. de Leon said the government rejected all bids for the reissued bonds as there is room for rates to decline as inflation has eased, with the central bank also saying it would keep borrowing costs steady to support the economy.

“Market has not sufficiently…priced in that inflation will be back within the target as supply disruptions are addressed,” Ms. De Leon told reporters in a Viber message after the auction.

Inflation eased for the third straight month in November to hit its lowest level in four months but remained above the government’s forecast for the year.

Philippine Statistics Authority (PSA) data showed headline inflation was at 4.2% in November, the lowest since July’s 4%. Last month’s result was also down from 4.6% in October, but still higher compared with the 3.3% print in November 2020.

However, the latest reading was higher than the Bangko Sentral ng Pilipinas’ (BSP) 3.3%-4.1% forecast for November. This was the fourth straight month inflation exceeded the BSP’s 2-4% target for the year.

Year to date, inflation averaged 4.5%, also exceeding the BSP’s forecast of 4.3% for 2021.

The BSP is expected to keep benchmark rates unchanged at its meeting on Thursday. It has not adjusted its policy settings since November 2020.

Meanwhile, a bond trader in a Viber message said the rejection was a surprise as the bids fell within the expected range.

Tuesday’s T-bond auction was the last one for the year.

The BTr wanted to raise P70 billion from the domestic market this month: P30 billion from Treasury bills (T-bills) and P40 billion via T-bonds.

It made full awards of the T-bills it offered in the three auctions part of its December program, raising P30 billion as planned. However, it rejected all bids for its two offerings of T-bonds this month.

The government plans to borrow P3 trillion from local and external sources this year to help fund a budget deficit that is expected to hit 9.3% of economic output. — Jenina P. Ibañez