MANILA, Philippines—The government rejected all bids for the 182- and 364-day treasury bills on Monday after banks offered “absurdly high” bids.
The Bureau of the Treasury said latest news about the tapering by the US Federal Reserve prompted banks to seek higher yields. The Treasury, however, said external developments should not cause a sharp rise in local interest rates because the economic fundamentals of the Philippines remained solid.
“[Risk aversion due to the US Fed’s tapering] drove rates at the auction above prevailing secondary market rates, prompting the auction committee’s decision to reject bids,” the Treasury said in a statement.
Had the auction committee accepted the bids for the 182-day bills, the rate for the six-month debt paper could have risen by as much as 220 basis points to 2.202 percent.
The rate for the 364-day bills could have jumped by 139.5 basis points to 2.474 percent had the Treasury accepted the bids.
The Treasury, however, accepted a portion of the bids for the 91-day T-bills and allowed the three-month yield to rise. The three-month debt paper fetched 1.458 percent, up 76.5 basis points.
Bids for the 91-day bills amounted to P15.77 billion, exceeding the government’s debt offering of P4 billion. The auction committee accepted only P3.88 billion worth of bids to avoid a sharper increase in the yield.
The Treasury said it accepted an amount of bids that would bring the rate for the 91-day bills to a level comparable to that in the secondary market.
The US Federal Reserve last week further reduced its monthly bond purchases, which serve as its key stimulus measure. After the cut in the amount of monthly bond purchases from $85 billion to $75 billion in January, the amount was further slashed to $65 billion last week. The tapering followed the belief that the US economy is improving.
National Treasurer Rosalia de Leon said the tapering in the United States should not cause a steep rise in interest rates.