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BTr rejects high bids for T-bonds

Inflation concerns prompt investors to seek more yield
By: - Reporter / @bendeveraINQ
/ 04:10 AM October 20, 2021

The Bureau of the Treasury (BTr) on Tuesday rejected all bids for the reissued 10-year bonds it offered, as inflation worries jacked up the yield that investors wanted in return for lending to the government.

Had the Treasury fully awarded its P35-billion offering, the average rate would have climbed to 4.883 percent or above secondary market levels, it said in a statement.

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Bid rates reached a high of 6.5 percent and a low of 4.115 percent for the bonds maturing in May 2027.

National Treasurer Rosalia de Leon said the rates submitted during the auction were “like an arm and a leg.”

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De Leon attributed the expensive yields pitched by investors to lingering concerns over elevated headline inflation, coupled with the United States Federal Reserve’s upcoming tapering or winding down of asset purchases like bonds to stimulate the US economy.

“But the BSP (Bangko Sentral ng Pilipinas) views high inflation as transitory, and the Governor’s (Benjamin Diokno) statement that it’s still early to lift [interest] rates should assure the market,” De Leon said.It did not help that tenders fell short of offering, with P34.1-billion worth generated by the IOUs maturing in five years and six months.

Prior to Tuesday’s auction, this bond series raised a total of P249 billion.

The Treasury also rejected reissued 11-year debt paper in August due to high bids, while the recent weeks’ bond auctions forced it to award longer-term securities despite rising yields as the government relied heavily on domestic financing from T-bills and bonds.

Asked if the Treasury had any “Plan B” as far as fund-raising was concerned in case high but transitory inflation would linger, De Leon replied: “We have a strong cash position supported by improving revenue collection and expected ODA (official development assistance) inflows.”

End-August tax and nontax revenues rose 3.9 percent year-on-year to P2.01 trillion as the economy further reopened from strict lockdowns, while foreign borrowings from ODA as well as offshore bond issuances would contribute P581.4 billion to this year’s financing program.

The government plans to raise locally P2.49 trillion or over four-fifths of its P3.07-trillion total borrowings for 2021, as domestic debt reduced foreign exchange risks as well as took advantage of oozing liquidity onshore. INQ

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TAGS: Bureau of the Treasury (BTr), Business, Rosalia de Leon, t-bonds
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