Treasury rejects all bids for T-bills

MANILA, Philippines - The Bureau of the Treasury (BTr) rejected all bids for 91, 182 and 364-day Treasury bills (T-bills) after banks sought higher returns for their money.

Finance Undersecretary Gil Beltran said investors were seeking rates that were higher by roughly 70 basis points for all three tenors.

“They’re not ready to place their money now. Their vision is clouded by what’s happening in Europe,” Beltran told reporters after the auction.

Investors are jittery over the impending exit of Greece from the euro, a move that could affect the credit ratings of other European countries such as Cyprus, Portugal, Ireland, Italy and Spain, said global debt watcher Moody’s Investors Service.

A crisis could scare off investors who are expected to shy away from other neighboring countries such as Spain, Portugal and Italy.

However, Beltran said there’s not need for investors to worry given the country’s strong economic fundamentals.

“We have excess in domestic funds,” Beltran said.

Had the government’s auction committee accepted the bids, the average rate of the 91-day T-bill would have risen to 2.878 percent, up by 70.4 basis points from the previously accepted average of 2.174 percent.

For this paper, investors tendered only P1.660 billion, below the programmed debt sale of P2 billion.

Similarly, the 182-day Treasury bill would have risen to 3.011 percent or 71.1 basis points higher than the previously accepted rate of 2.3 percent for the same paper.

For this paper, investors tendered only P1.8 billion, below the planned debt sale of P2 billion.

The one-year paper, meanwhile, would have risen to 3.201 percent from 2.5 percent or an increase of 70.1 basis points. Tenders for this paper reached P3.05 billion, below the programmed debt sale of P3.5 billion.

Market investors have been seeking higher yields for their money, prompting the Treasury to reject bids.

Given the lackluster appetite from investors, the Bureau of the Treasury (BTr) may slash its domestic borrowing program in the third quarter of the year, Deputy Treasurer Eduardo Mendiola said.

“It could be P100 billion or below,” said Mendiola.

However, he said nothing is final yet and the actual program could still depend on market conditions.

In the second quarter of the year, the government had a domestic borrowing program of P106.5 billion, lower than the first quarter borrowing program of P117 billion.

The government relies on local and foreign borrowing to fund its budget deficit, which is expected to hit roughly P280 billion this year. Last year, the budget gap hit P197.8 billion, lower than the original program of P300 billion set for 2011.