Treasury rejects all bids for 10-year T-bonds as market seeks high rates

Rosalia de Leon

MANILA, Philippines—The Bureau of the Treasury on Tuesday (Dec. 7) rejected all bids for P20 billion in reissued 10-year bonds it offered as the market sought high rates.

Despite P42.4 billion in tenders, which made the auction more than twice oversubscribed, bid rates averaged a higher 5.071 percent for the debt paper that would mature in nine years and seven months.

When first sold last July, these IOUs fetched a coupon rate of 4 percent. So far, the Treasury raised a total of P189.9 billion from this bond series.

National Treasurer Rosalia de Leon said the Treasury fully rejected the elevated bids as inflation already decelerated for three straight months. Headline inflation of 4.2 percent year-on-year in November, however, remained above the Bangko Sentral ng Pilipinas’ (BSP) 2 to 4 percent target range of manageable price increases.

Also, De Leon noted that BSP Governor Benjamin Diokno “consistently expressed that accommodative stance”—or low interest rates—”will stay to support recovery.”

De Leon said rates attracted by Tuesday’s P20-billion T-bond offering had a “wide difference between the highest and the lowest” such that a bigger volume could have further pushed yields sought by government securities eligible dealers (GSEDs) even higher.

The Treasury’s bond offerings in December were smaller than the P35-billion in debt papers it auctioned off weekly during previous months, in a bid to keep the debt-to-gross domestic product (GDP) ratio at the targeted 59.1-percent level by end-2021.

As debt accumulation outpaced economic growth, debt-to-GDP—which reflected capability to repay obligations—climbed to a 16-year high of 63.1 percent as of end-September, above the 60-percent threshold deemed by credit rating agencies as manageable among emerging markets like the Philippines.

TSB