The government rejected all bids for 182-day treasury bills and some bids for the 364-day bills, preventing a potentially faster rise in the cost of its borrowing.
Banks sought higher interest rates on six-month and one-year government securities amid speculation that inflation could accelerate in the months ahead. A faster increase in prices of goods and services gives investors a reason to seek higher returns on portfolio investments.
Had the Bureau of the Treasury’s auction committee accepted bids for the six-month bills, the interest rate could have hit as much as 3.708 percent, up more than a percentage point from 2.44 percent registered in last week’s auction.
There were P3.86 billion worth of bids for the six-month government securities. The amount was slightly higher than the P3.5 billion worth of debt notes being offered by the government. Despite the oversubscription, the auction committee perceived that the bids were not competitive since these were accompanied by high interest rates.
“The bids for the six-month [bills] were just throw-away ones and so we rejected them,” National Treasurer Roberto Tan said in a press briefing after the auction.
Bids are described as “throw-away” when banks were deemed to raise them just for the sake of participating in the bidding and did not mind whether or not they were awarded the government securities allocation.
For the 364-day bills, the auction committee accepted only P2.03 billion worth of bids compared with its debt offering of P4 billion.
Had the auction committee accepted P4 billion worth of bids, the one-year bills could have fetched an interest rate of 3.398 percent, up 48.7 basis points from the previous rate of below 3 percent.
Tan said the auction committee accepted an amount of bids that allowed the rate for the one-year bills to be almost similar to that in the secondary market.
For the bellwether 91-day bills, the government accepted P1.5 billion worth of bids, the same amount on offer.
The rate for the three-month government securities settled at 2.88 percent, down 0.008 percent from the previous rate of 2.888 percent.
Tan said the lower rate sought by banks for the three-month bills reflected their preference for the shortest-tenor government security.
He said demand for the three-month bills was significant, with tenders reaching P5.14 billion, because there were about P4 billion worth of previously issued 91-day bills maturing this week.