The government rejected all tenders for the treasury bills offered in Monday’s auction as the rates asked by the market were found too high and the demand too low.
The fiscal problems in Europe have apparently continued to dampen investor appetite in securities.
All tenors were undersubscribed, with buyers making available only P6.51 billion, or about half a billion short of the total offer of P7.5 billion.
Investors put forward only P1.66 billion and P1.8 billion for the P2-billion offer each for the 91-day and 182-day bills.
Also, P3.05 billion was offered for the P3.5-billion one-year treasury bills.
Had the government accepted all tenders, the interest on the benchmark debt paper would have gone up by 70.4 basis points to an average of 2.878 percent. Likewise, the interest on the six-month bill would have gone up by 71.1 basis points to 3.011 percent while that for the yearlong bill would have risen by 70.1 basis points to 3.201 percent.
These averages, compared to corresponding prevailing rates in the secondary market, would have been higher by 27.8 basis points, 70.6 basis points and 68.1 basis points, respectively.
As of auction time Monday, the prevailing rates at the Philippine Dealing and Exchange Corp. were 2.2 percent for the 91-day bills, 2.305 percent for the 182-day bills and 2.52 percent for the one-year bills.
“I don’t think they (investors) are ready to place their money now,” said Finance Undersecretary Gil S. Beltran, who chaired the auction committee in lieu of National Treasurer Roberto B. Tan.
“There’s still chaos in Europe (and the investors’) vision is clouded by what is happening (over there),” Beltran said in an interview.
He said the Philippine economy, including the country’s financial markets, “should be divorced” from developments in Europe because the Philippines was no longer borrowing commercial funds from that region.
“We have excess domestic funds because there’s a lot of remittances from overseas Filipinos,” Beltran said. “There’s a lot of inflows and that’s what’s keeping our market liquid.”
This is the third time in as many auctions that the government rejected all tenders for the 91-day bill, and the second time for the 182-day bill since last month.
“Probably the players are still not clear on where interest rates should go,” Beltran said.
Asked whether the government could afford to keep on rejecting tenders, he said the government had a lot of money.
“We have P50 billion that was borrowed in the first four months but has not yet been used,” he said.
Even then, he said the reasonableness of rates was what influences auction results.
“Once the bids are beyond what we think are the secondary market rates, we should not accept them,” Beltran said. “This will move the market to the wrong end.”