Gov’t rejects bids for reissued 7-year T-bonds on rising rates

THE government rejected all bids for reissued seven-year Treasury bonds (T-bonds) on Tuesday as rates exceeded market expectations despite easing inflation.

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

Bids reached P41.42 billion, lower than P52.267 billion when the bond series was last offered on Dec. 14. All tenders also got rejected at that time. The series attracted P57.215 billion in bids the last time the bond series was sold on Oct. 26.

Had the Treasury fully awarded the bonds, the average yield would have jumped by 34.6 basis points to 4.814% from 4.468% at the previous auction.

This was higher than 4.6729% quoted at the secondary market before the auction, based on PHP Bloomberg Valuation Reference Rates posted on the Philippine Dealing System’s website.

Tenders were rejected as rates were “unreasonably high,” National Treasurer Rosalia V. de Leon told reporters in a Viber message.

Inflation would likely ease, while the Bangko Sentral ng Pilipinas tries to support economic recovery, she said. Inflation eased to a four-month low of 4.2% in November.

Inflation likely eased to 3.9% — the midpoint of the central bank’s forecast of 3.5% to 4.3% — in December, according to a BusinessWorld poll of 13 analysts last week.

If realized, inflation will settle within the central bank’s 2-4% target for 2021.

Ms. De Leon said the government had strong revenue collections and official development assistance disbursements even after bids at the last two bond auctions got rejected.

“Even with the rejection, the cash balance remains comfortable to meet requirements,” she said.

A trader said submitted bids had exceeded market expectations. “With the government’s view that the consumer price index will ease to its 2%-4% range, it was fitting to reject all bids,” he said in a Viber message.

Otherwise, secondary rates could surge as well, the trader said.

The government plans to borrow P200 billion from the domestic market this month — P60 billion via Treasury bills and P140 billion from Treasury bonds. — Jenina P. Ibañez