THE GOVERNMENT on Tuesday rejected all bids for its offer of fresh seven-year Treasury bonds (T-bonds) as investors asked for high rates due to inflation fears.
The Bureau of the Treasury (BTr) did not accept any tenders for the securities even as bids reached P36.3 billion, higher than the P35 billion on offer.
Had the government made a full award, the fresh seven-year notes would have fetched a coupon rate of 6.5%, 136.35 basis points higher than the 5.1365% quoted for the tenor at the secondary market before the auction, based on the PHP Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.
National Treasurer Rosalia V. de Leon in a Viber message to reporters said the BTr did not accept any bids as there was low demand for the tenor, with tenders just over a billion over the offered amount.
“Markets still roiled by rising inflation fears from surge in oil and commodity prices. Verdict on Fed rate hike is also awaited,” Ms. De Leon said.
“Following strong RTB 27 (retail Treasury bond) reception, the government is well positioned to meet disbursements despite BTr’s rejections during auctions,” Finance Secretary Carlos G. Dominguez III said in a Viber message.
A bond trader in a phone interview said investors asked for a higher rate due to the weakening peso and expectations of higher inflation.
This also led investors to seek shorter-term tenors over the seven-year instrument, the trader added.
International oil benchmark Brent crude, which briefly hit more than $139 a barrel in the previous session, was up about 2.6% at $126.42 in afternoon trade on Tuesday, Reuters reported.
US crude ticked up 1.8% at $121.55 a barrel, while prices of many other commodities, including nickel, rose as industrial buyers and traders scramble as the Russian-Ukraine conflict shows no sign of cooling.
Philippine inflation was at 3% for the second consecutive month in February, easing from 4.2% a year earlier.
Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said the war between Russia and Ukraine and its impact on international oil prices will continue to spill over to local costs and could cause inflation to again exceed the central bank’s target range of 2% to 4%.
The peso sank versus the greenback on Tuesday, closing at P52.32 per dollar from its P52.18 finish on Monday.
Meanwhile, US Federal Reserve Chairman Jerome H. Powell last week said Russia’s invasion of Ukraine has not changed the central bank’s plans to start raising interest rates this month.
He has said that he is inclined to support a 0.25% rate hike at the March 15-16 meeting of the Federal Open Market Committee.
The BTr also rejected all bids for its offer of Treasury bills (T-bills) on Monday even as the offer was oversubscribed as investors asked for higher rates.
The Treasury plans to raise P250 billion from the domestic market this month, or P75 billion via T-bills and P175 billion from T-bonds.
The government borrows from local and external sources to help fund a budget deficit capped at 7.7% of gross domestic product this year. — Jenina P. Ibañez with Reuters