The Bureau of the Treasury on Tuesday rejected bids for the P20 billion in new 10-year T-bonds offered at the first auction of 2018 as the debt paper fetched higher rates.
Tenders amounted only P18.676 billion, making the auction undersubscribed.
In a statement, the Treasury said the bid rates reached 6.5 percent and averaged 5.461 percent for the IOUs maturing on Jan. 11, 2028.
National Treasurer Rosalia V. de Leon told reporters after the auction that the appetite might have been tepid due to the long tenor as well as expectations of higher interest rates here and abroad.
Besides another looming rate hike from the US Federal Reserve, the Bangko Sentral ng Pilipinas may also tighten monetary policy, partly as consumer prices are expected to rise faster due to the Tax Reform for Acceleration and Inclusion (TRAIN) Act signed by President Duterte in December, De Leon noted.
Package 1A of the TRAIN under Republic Act No. 10963 starting Jan. 1 this year slashed and restructured personal income tax rates that stayed the same for two decades, but also jacked up or slapped new taxes on consumption of oil, cigarettes, sugary drinks and vehicles.
De Leon nonetheless pointed out that the BSP already allayed fears of an overheating economy.
She added that since the debt paper was a new issue, there was a liquidity premium that investors likely embedded in their bids.