By Karl Angelo N. Vidal, Reporter
THE GOVERNMENT rejected all bids for the reissued 20-year Treasury bonds (T-bond) it offered on Tuesday as market preference remains on the short-end of the curve ahead of the August policy meeting of the local central bank.
The Bureau of the Treasury (BTr) decided to not accept any tenders for its P15-billion offer of reissued 20-year bonds yesterday.
This, even as total offers placed by banks and other financial institutions amounted to P20.556 billion, above the amount the Treasury intended to borrow.
Had the BTr decided to accept all bids, the bonds, which carry a coupon rate of 6.5%, would have fetched an average rate of 7.39%, 41.1 basis points higher from the 6.979% recorded in the previous 20-year bond auction.
At the secondary market, prior to the auction, the debt notes were quoted at 7.5546%.
At the close of the trading, the 20-year bonds fetched a rate of 7.5446%.
Following the auction, Deputy Treasurer Erwin D. Sta. Ana said the Treasury rejected all offers as they found the bids to be “higher than expected.”
“I think [the market players] are looking for really higher rates at this environment,” Mr. Sta. Ana told reporters yesterday. “Actually in this auction, we saw bids up to 8.5%.”
Amid the high rates, Mr. Sta. Ana noted that demand from investors was still “healthy” as market players are waiting for the August policy meeting of the Bangko Sentral ng Pilipinas (BSP).
“[The investors factored into their bids] the hawkish stance of the central bank. Everyone is expecting for a hike next week.”
The central bank has been hinting at another rate hike during the Monetary Board meeting on Aug. 9 to quell inflation expectations.
“In the face of rising threats to inflation, we hiked policy rates last May and June. We are ready to follow through to secure our inflation target,” BSP Governor Nestor A. Espenilla, Jr. said in a speech at a reception for the banking community on Friday.
He added that the monetary authority remains firmly committed to its primary mandate of price stability.
The central bank has already raised its key rates twice this year in the face of higher inflation. Borrowing costs now stand within a 3-4% range.
Despite fully rejecting bids in previous T-bonds auctions, Mr. Sta. Ana said government revenues from its collecting agencies are doing “quite well,” which means the government has no urgent need to borrow.
“We always monitor revenues and our collecting agencies are doing quite well so to some extent it eases out the burden from the debt side,” he said. “We have a healthy cash balance so that has been sustained with this upbeat revenue collections. So from a cash perspective, there is leeway for government to move.”
Meanwhile, a bond trader said the auction result was “expected,” adding that the drastic uptick in rates might normalize next month.
“[We can expect healthier demand from investors] maybe next month since we have a maturity amounting to P86 billion on Aug. 18,” the bond trader said in a text message.
The Treasury wants to raise P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in T-bonds.
The government plans to borrow P888.23 billion this year from domestic and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product.

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