Government rejects short-term T-bill bids

The government rejected yesterday all bid applications for the short-term Treasury bills (T-bills) as the market tried to bid up anew the rates for the benchmark 91-day and 182-day T-bills.

However, for the 364-day T-bills, the government auction committee finally allowed a 42.8-basis point increase, allowing the yield to average at 18.926 percent from a 13.498-percent average posted last Oct.16.

At yesterday’s auction, only P715 million worth of tenders were made for the 91-day T-bills, resulting in the full rejection of bids which were all out of range.

For the 182-day bills, tenders amounted to a mere P835 million which were also rejected in full by the government.

Sources said the government is not about to give in to higher bids as its cash position is still strong.

"Government has more leeway in rejecting the T-bill bids this week and perhaps in the next few weeks because of its success in the issuance of short-term cash management bills (CMBs)," they said.

The issuance of CMBs is a temporary measure to secure financing for the government after several weeks of rejection during the regular T-bill auction.

Tomorrow, government will conduct the first auction for the CMBs. It will offer three tenors of 42, 63, and 84 days.

The first issuance of CMBs last week was done through the tap facility and allowed for a negotiated sale. A total of P16 billion was raised last week from the CMB offering.

The Bureau of Treasury (BTr) said earlier that the P16 billion borrowing was enough to cover the past three auctions where government rejected in full bid applications for T-bills.

The Bangko Sentral ng Pilipinas (BSP) and the Bankers Association of the Philippines agreed earlier that the CMB rates will temporarily be the base for all short-term borrowings as market does not believe that the 91-day rate is currently realistic.