THE GOVERNMENT rejected all bids for the fresh seven-year Treasury bonds (T-bonds) it offered on Tuesday amid higher rates, amid uncertainties due to the coronavirus disease 2019 (COVID-19) pandemic.

The Bureau of the Treasury (BTr) yesterday rejected all tenders for the fresh seven-year T-bonds worth P31.35 billion as yields shot up, even as the total was more than the P30 billion on offer.

Had the BTr made a full P30-billion award, the notes would have fetched a coupon of seven percent and an average rate of 5.583%.

The last time the Treasury offered seven-year papers was on Jan. 21 where the BTr only awarded P27.2 billion out of the P30-billion program at an average rate of 4.732%, even as the offer was almost twice oversubscribed.

The BTr on Monday likewise chose not to award the P20-billion Treasury bills it offered due to high rates.

National Treasurer Rosalia V. de Leon said they decided to reject all T-bonds tenders yesterday as investors asked for rates higher than those at the secondary market and the BTr’s own estimates as “cash remains king” amid the virus outbreak.

“Rejected all bids. Submission too high from our internal estimates and BVAL (Bloomberg Valuation Service). Since original issue, coupon setting will land at 7%,” she told reporters in a Viber message yesterday.

The seven-year bonds ended at 4.9% on Monday, based on the PHP BVAL Reference Rates published on the Philippine Dealing System’s website.

A bond trader said the rejection is the Treasury’s way to help “calm the market” and reassure investors that the national government is in good fiscal standing and is “not panicking” even as COVID-19 continues to spread.

“BTr, in a way, is helping calm the markets, albeit maybe unintentionally. But rejecting at these levels reassure markets that BTr is not panicking,” the trader said in a Viber message.

The trader said had the Treasury awarded the offer at the high rates sought by investors, the market might think the government is running out of cash “and will do whatever it takes to borrow.”

To contain and slow the spread of COVID-19 in the country, the government gas put Luzon under a month-long lockdown and also announced several fiscal and monetary measures to help mitigate the impact of the virus on the economy.

On the fiscal side, the government has rolled out an initial P27.1-billion economic stimulus package to help affected sectors, while another package of over P200 billion is now being deliberated by the Congress.

On top of this, Finance Secretary Carlos G. Dominguez III said the economic team is mulling another set of stimulus packages, but declined to give more details.

This, even as the government is bracing for lower revenues due to business disruptions caused by the lockdown as well as the P145 billion worth of delayed tax payments as the deadline for the filing of income tax returns was extended to May 15.

Meanwhile, the Bangko Sentral ng Pilipinas last week cut policy rates by 50 basis points (bps) in a bid to support the economy. On Monday, it launched a bond buyback program with the Treasury worth P300 billion, and on Tuesday also cut big banks’ reserve ratio by 200 bps to inject more liquidity into the financial system.

As of Tuesday morning, COVID-19 cases in the Philippines totaled 501, with 33 deaths and 19 recoveries also recorded.

The government plans to raise P1.4 trillion this year from local and foreign lenders to plug its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product (GDP). However, the National Economic and Development Authority, in a report published Tuesday, said the budget deficit might balloon to 4.4-5.4% of GDP this year as the government spends aggressively to stem the economic fallout from the virus. — Beatrice M. Laforga

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