BTr rejects bids for 10-year T-bonds on higher rates

MANILA, Philippines–The Bureau of the Treasury on Tuesday rejected all bids for P25 billion worth of reissued 10-year treasury bonds, as the bid rates offered by investors were higher than that in the secondary market.

The average bid rates of investors who wanted to purchase the T-bonds maturing on Aug. 20, 2024 hit 3.659 percent, whereas the rate in the secondary market stood at 3.567 percent yesterday.

Tenders for the debt paper reached a total of P49.588 billion or almost double the offering. The IOUs were issued on Aug. 20 last year, hence they have a remaining life of nine years and three months.

In the meantime, after almost half a year of delay in implementation, the nonrestricted trading and settlement environment for government securities will be finally rolled out on May 4, according to the BTr.

“The market community is now in the position to fully implement this key initiative, having reached the culmination of various preparatory activities including several cycles of market-wide testing, establishing business continuity processes and systems readiness protocols,” National Treasurer Roberto B. Tan noted in a memorandum issued by the BTr last April 20.

“We enjoin all participants in the government securities market to conclude and complete their remaining internal preparation to ensure smooth transition to the nonrestricted trading and settlement environment,” Tan said.

Further, Tan reminded market participants that under Treasury Circular No. 04-2014, the Securities Account for Tax Tracking (SATT) would be used to track transfers coming from the nonrestricted trade of peso-denominated, coupon-bearing government bonds.

“Securities balances in the SATT will be the subject of tax tracking, a feature mandated by Department Order [DO] No. 68-2014 to lift the transfer restrictions between taxable and tax-exempt institutions,” Tan said.

“To pave the way for the said tax tracking and for the [BTr] to properly compute the final withholding tax due, the market shall observe the trading and settlement mechanics for the nonrestricted trading and settlement environment,” the National Treasurer added.

Last February, the BTr conducted month-long market-wide testing activities that simulated the nonrestricted trading environment, an initiative that had been delayed thrice.

The initiative’s initial implementation date of Nov. 24 last year was canceled just four days before the schedule, and was moved to Jan. 5 this year.

The live date was later pushed back to Feb. 2, before it was again postponed.

Under the Department of Finance’s latest amendment to DO No. 141-95 via DO 068-2014 issued in August last year, government securities were to be allowed to trade between various entities, regardless of their tax category or classification, in any BTr-accredited government securities trading market.

Transfers between market participants will be allowed regardless of tax status, hence allowing tax-exempt institutions to trade in the debt market.

The BTr noted that DO 141-95, which was issued two decades ago, had “restricted the transfers of securities between taxable and tax-exempt institutions, effectively segmenting the government securities market along these tax categories.”