THE GOVERNMENT rejected all bids for the Treasury bills (T-bill) it offered on Wednesday as rates came in higher than expected as the market awaits the policy meetings of the local and US central banks.
The Bureau of the Treasury (BTr) did not accept any tenders during the auction on Monday, where it intended to borrow P15 billion via the short-term debt. This was the first auction where the Treasury made a full rejection in nearly seven months or since Feb. 26.
The demand for the T-bills was tepid as total tenders came in at P15.97 billion, lower than last week’s P20.7 billion and just filling the offer volume.
Broken down, the government rejected all bids for the 91-day tenor. Total offers reached just P2.991 billion out of the P4 billion it wanted to raise.
Had the government accepted all tenders, the three-month papers would have fetched an average rate of 4.381%, 83.2 basis points (bp) higher than the 3.549% tallied during the Sept. 10 auction.
The BTr also declined P4.575-billion worth of tenders put up for the 182-day debt. This is short of the P5-billion program. The average rate would have climbed 54.5 bps to 5.142% from last week’s 4.597% had the Treasury accepted all offers.
The Treasury likewise refused to award any 364-day T-bills, even with offers reaching P8.401 billion, above the P6 billion the government wanted to raise. Had the government made a full award, the papers would have fetched a yield of 5.643%, 24.3 bps higher than the 5.4% quoted last week.
At the secondary market prior to the auction yesterday, the three- and six-month papers were quoted at 4.3054% and 4.8354%, respectively, while the rate of the one-year notes stood at 5.3899%.
At the close of trading, all the T-bill tenors rallied to fetch lower rates. The 91-day debt papers were quoted at 3.9397%, while the 182-day securities fetched 4.5635%. The 364-day T-bill saw its rate drop slightly to 5.3866%.
Deputy Treasurer Erwin D. Sta. Ana said after the auction that the Treasury decided to reject bids across the board ahead of the monetary policy decisions of the Bangko Sentral ng Pilipinas (BSP) as well as the US Federal Reserve this week.
“The committee decided to fully reject all tenors…because [it] believes that it will be more prudent to wait for the policy meeting of the Monetary Board this week,” Mr. Sta. Ana told reporters on Monday.
The BSP is widely expected to tighten its policy settings anew on Thursday. In a BusinessWorld poll conducted last week, at least 15 economists expect the central bank to increase its benchmark rates by another 50 bps to quell inflation expectations.
The BSP has raised borrowing costs by a cumulative 100 bps since May, with rates currently ranging 3.5-4.5%.
Meanwhile, the Fed’s policy-setting Federal Open Market Committee is also seen to raise its rates at its meeting this week.
The market has also priced in another round of policy tightening from the US central bank in December and twice more in 2019 due to a tightening job market and rising inflation.
“From the 91- and 182-day day T-bills, both were undersubscribed. It could be a manifestation of those two events happening this week,” Mr. Sta. Ana added. “We’ve taken a more prudent way of managing it so we just have to wait for what’s going to happen this week.”
A bond trader likewise said the Treasury opted to reject all bids as expected due to the upcoming policy meetings of BSP and Fed.
“For the 364-day, it could have gone up higher by 15-20 bps had the BTr accepted bids. It’s too high so they rejected the bids instead,” the trader added.
The Treasury is raising P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in Treasury bonds.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product.
MARAWI BONDS
Meanwhile, Mr. Sta. Ana said the BTr is preparing for a possible retail Treasury bonds (RTB) to be offered to support the rehabilitation of war-torn Marawi City, although he noted that the timing and size of the issue is still in the works.
“Timing is not certain at this point, but we are putting all efforts to make it live for Marawi,” Mr. Sta. Ana said.
Last Thursday, Task Force Bangon Marawi chair Eduardo D. Del Rosario said the government intends to raise P50-60 billion through an RTB offer next month. He said the final issue size will ultimately depend on the BTr and the Department of Finance which will determine how much will be needed.
“Although this is not sure yet, maybe an auction size at the minimum, but it depends on the requirement again for Marawi,” Mr. Sta. Ana said.
The Deputy Treasurer noted that the bureau is “still positive” about offering the RTBs within the year, which will likely carry a tenor in the short end or belly of the curve.
Mr. Sta. Ana also said a portion of the possible RTBs can be offered via an online platform.
“There is a component that is online so we are working with our market markers on how we can implement an online ordering platform,” he said.
The proceeds of the bond offer will supplement the funds allocated by the government as well as pledges and development assistance from other counties and private firms. — Karl Angelo N. Vidal

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