THE GOVERNMENT rejected all bids for its offer of reissued 10-year Treasury bonds (T-bonds) on Tuesday as investors sought higher yields amid expectations the central bank will keep rates steady in the near term.

The Bureau of the Treasury (BTr) did not award any 10-year T-bonds on Tuesday even as tenders reached P44.507 billion, more than the P30 billion on the auction block. This, as the bonds fetched an average rate of 3.329%, up 60.5 basis points (bps) from the 2.724% quoted for the tenor at the Aug. 12 auction, where it made a full P30-billion award of its offer of the reissued papers.

At the secondary market on Tuesday, the 10-year bonds fetched a rate of 3.093%.

National Treasurer Rosalia V. de Leon said investors asked for higher yields on the long tenor as the Bangko Sentral ng Pilipinas (BSP) is seen keeping benchmark rates steady.

“Investors’ appetite remains on [the] immediate part of [the] curve. They see policy rates will remain steady for [the] rest of [the] year,” Ms. De Leon told reporters via Viber after the auction.

The central bank may maintain the low interest rate environment in the next two years to provide support to the economy amid uncertainty caused by the coronavirus disease 2019 (COVID-19) pandemic, BSP Governor Benjamin E. Diokno said on Monday.

“Given that there’s a lot of uncertainty still in the air, we are committed to a long-term low inflation regime…. To me, that is what we intend to do. What we have done will be on the table for the next, maybe, another two years,” Mr. Diokno said in an interview with ANC News Channel when asked about the country’s interest rate environment by 2023 after the Federal Reserve’s recent signal that US interest rates should be kept at near-zero for at least three years.

Rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities are at record lows of 2.25%, 2.75%, and 1.75% after the central bank slashed rates by a total of 175 basis points this year.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said yields on the 10-year bonds rose as investors expect inflation to accelerate.

“The BTr opted to reject the 10-year auction with the market asking for higher yields to compensate for a possible pickup in inflation in September and October,” Mr. Mapa said in an e-mail.

Inflation eased to a three-month low of 2.4% in August, slower than 2.7% in July 2020, but faster than the 1.7% in August 2019.

This brought the year-to-date average to 2.5%, within the BSP’s 2-4% target band and slower than the 2.6% forecast for 2020.

The Treasury is looking to raise P160 billion from the domestic market this month: P100 billion via weekly auctions of Treasury bills and P60 billion via T-bonds to be offered fortnightly.

The government is looking to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product. — K.K.T. Jose

RELATED ARTICLESMORE FROM AUTHOR