Treasury rejects high bids for T-bills

Rising government borrowing costs were stemmed as the Bureau of the Treasury rejected bids for “unreasonably” high interest rates on short-term IOUs sold Monday.

National Treasurer Rosalia de Leon said the government had the luxury to be more selective with the bids it accepted, noting the sustained increase in collections by the bureaus of internal revenue and of customs.

“Collections are better. So even without the float, we get the cash. There’s a match between collections and disbursements,” De Leon said after Monday’s auction of short-term bills.

The rate for 91-day securities rose 21.6 basis points to 1.373 percent. However, the Treasury rejected all bids for the six-month bills. For one-year IOUs, the Treasury decided on a partial award of just more than half of the intended issue, allowing rates to rise by just 15.1 basis points.

De Leon said the Treasury was willing to accept a reasonable increase in rates to take into account the Bangko Sentral ng Pilipinas’ (BSP) recent decision to raise yields for special deposit accounts (SDA).

SDA rates were increased from record lows by 25 basis points to 2.25 percent across all maturities as monetary authorities sought to mop up liquidity from the system to curb demand and keep prices table. Higher SDA rates encourage banks to park more money with the BSP.

Had the Treasury accepted bids for six-month and notes, yields would have risen by 29.9 basis points. A full award for one-year bills would have resulted in a 24.8-basis-point increase in rates. The Treasury raised just P11.66 billion Monday, or just over half of its intended P20 billion.

“(The bids) were too high… It was much higher than secondary market rates,” De Leon said, referring to bids for the six-month and one-year notes.