THE GOVERNMENT rejected all bids for the Treasury bills (T-bills) auctioned off on Monday as rates spiked with the offer undersubscribed as investors opted to hold cash amid the coronavirus disease 2019 (COVID-19) pandemic.

The Bureau of the Treasury (BTr) rejected all bids for T-bills worth P14.5 billion across all tenors yesterday, which made up only 72.5% of the P20-billion offering.

Broken down, bids for the 91-day T-bills totaled P7.53 billion against the P6-billion initial offer. Had the three-month papers been fully awarded, the average rate would have risen 81.7 basis points (bps) to 3.841% against last week’s rate of 3.024%.

For the 182-day papers, the Treasury rejected all bids worth P4.12 billion against the P6-billion program. Had it made a full award, the six-month papers would have fetched an average rate of 4.766%, jumping by 136.8 bps from the 3.398% fetched previously.

The BTr likewise did not award any 364-day papers as total tenders stood at just P2.85 billion or only 35.62% of the P8-billion plan. If fully awarded, the one-year securities would have fetched an average rate of 5.35%, higher by 179.3 bps than last week’s rate of 3.557%.

National Treasurer Rosalia V. de Leon told reporters in a Viber message that they opted to reject all bids across the tenors due to higher rates, as investors made “throwaway bids” since they want to hold on to their cash amid uncertainties due to the virus.

“Throwaway bids. Preference to hold cash with lingering virus. Not serious bids,” Ms. De Leon said.

She said this trend of higher rates and low bids is “expected to continue” but will “hopefully not” spill over to the next quarter.

The BTr has yet to release its borrowing program for the second quarter.

Meanwhile, a bond trader said the result was expected as demand for T-bills is still low as the “market was not able to fully absorb the T-bills auctioned off last week.”

“Last week’s auction was an evidence that the trend of falling yields for T-bills is over. The BTr probably rejected the bids to prevent yields from rising again. Investors prefer cash and that may just be the trend for a while,” the trader said in a Viber message.

The trader said a “throwaway bid” is a defensive way of bidding where investors place offers for higher returns as these are expected to be “rejected or awarded close to the high accepted yield.”

President Rodrigo R. Duterte placed Luzon under enhanced community quarantine until April 13 to contain the spread of COVID-19 that has infected 396 and killed 33 people in the country as of Monday.

On Tuesday, the BTr will offer P30 billion worth of fresh seven-year Treasury bonds (T-bonds).

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via T-bonds.

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. — Beatrice M. Laforga

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