MANILA -- The Bureau of the Treasury’s (BTr) auction committee on Tuesday rejected all bids for the 20-year Treasury bond (T-bond) after rates rose beyond the acceptable level.
Had the auction committee fully awarded the debt paper for PHP20 billion, its average rate would have risen to 5.356% from the 5.015% that the same tenor fetched during the auction last July 30. Total tenders reached PHP30.72 billion.
“Bids came in higher than secondary market levels and even in the last auction and we feel that given the inflation path and the actions from the BSP, we feel that the rates should not be heading where it is based on the bids,” Deputy Treasurer Erwin Sta. Ana told journalists after the auction.
Except for an uptick to 3.2% last May from the previous month’s 3%, the domestic rate of price increases has been declining since peaking at 6.7% in September and October 2018.
This has provided the Bangko Sentral ng Pilipinas (BSP) leeway to slash its key policy rates by a total of 50 basis points to date after hiking it by a total of 175 basis points last year to help address the elevated inflation rate.
Sta. Ana attributed the demand for higher yields to investors’ worries about the impact of the geopolitical issues overseas that resulted in, among others, the drone attack in oil facilities in Saudi Arabia.
He said the hawkish statement from the Federal Reserve is also a factor despite the 25-basis-point cut in its key rates to a range between 1.75 to 2% last September 18.
“Given that, there could be a possibility that dealers would think they cannot park funds in long tenor securities. But we feel that oil prices is actually not a concern for now as the (BSP) Gov(ernor) mentioned earlier and, you know there is a policy meeting wherein there is a possible rate cut as what has been circulating. So we don’t see the oil issue as a catalyst for rising interest rates,” he added.
BSP’s policy-making Monetary Board (MB) will have its sixth meeting for this year on September 26, and it is widely expected to cut rates anew given the sustained drop of inflation rate.
Meanwhile, Sta. Ana said BTr officials do not see a major setback to the budget, vis-à-vis President Rodrigo R. Duterte’s order to reject any financial aid from 18 countries that voted to approve a United Nations Human Rights Council (UNHRC) resolution calling for an investigation on the killings related to the government’s war against illegal drugs.
“We don’t see that as a dent in our funding program,” he said, citing the government has been diversifying its funding sources for several years now.
“And of course, domestically, even for next year, we are raising 75 percent of our funding domestically,” he added.
Sta. Ana, however, said that although foreign borrowings “is a very small portion of our financing, definitely, you have to balance it out with spending for example and then the performance of the revenue.” (PNA)
