THE GOVERNMENT rejected all bids at yesterday’s auction of Treasury bills (T-bill) as it saw weak demand due to its recent offer of retail bonds.
The Bureau of the Treasury rejected bids totalling P10.5 billion, falling short of the planned P20-billion borrowing.
Broken down, the 91-day debt paper was met with demand worth P3.995 billion, lower than the Treasury’s offer of P8 billion.
The Treasury also rejected P3.466 billion worth of bids for the 182-day tenor, which also fell short of its P6-billion offer.
Lastly, the 364-day debt papers attracted P3.021 billion in demand, also below the programmed borrowing of P6 billion.
At the previous auction of T-bills last Nov. 16, average rates of the three-month, six-month and one-year tenors were quoted at 2.148%, 2.563% and 2.952%, respectively.
Meanwhile, at the secondary market ahead of yesterday’s auction the 91-day, 182-day and 364-day papers carried yields of 3.0318%, 2.9283% and 3.1008%, respectively.
Following the Treasury’s rejection of all offers, the yield on the three-month T-bill closed unchanged, while the rates of the six-month and one-year securities respectively dropped to 2.9075% and 3.0839%.
National Treasurer Rosalia V. De Leon said the government rejected all bids by banks after rates went above what the Treasury was willing to pay.
“[It’s really high.] If you would look, [we saw bids increase by] an average of 30 to 35 bps (basis points) across all tenors,” Ms. De Leon said after the auction.
The official said liquidity also went to the government’s offer of retail Treasury bonds (RTB).
“At the same time, [probably] they’re thinking that we may also reject given we have the abundant subscription into the RTB,” Ms. De Leon noted.
Meanwhile, sought for comment, traders said they anticipated the rejection, with one noting that increase in yields by more than 10 bps will be too big for Treasury.
“The banks are keen on buying RTBs so it’s not that surprising to see thinner volume of bids,” a trader said over the phone.
The Treasury awarded P130 billion worth of five-year retail bonds last Nov. 20 at a 4.625% yield.
Ms. De Leon said they have closed the offer period as of 3:30 PM yesterday, earlier than the initial cut-off date of Nov. 29.
The government borrows from both local and external sources to tap market liquidity in order to finance its budget deficit capped at 3% of gross domestic product, or about P482.1 billion.
This year, the government has set a P727.64-billion borrowing plan, 80% of which or P582.11 billion will be sourced from local lenders through T-bills and Treasury bonds. The P145.53-billion balance, meanwhile, will be borrowed from external creditors. — K.A.N. Vidal