Government rejects offers for one-year T-bills

MANILA, Philippines - The government rejected offers on one-year debt papers Monday and made partial awards on shorter-dated three-month and six-month instruments after it tried to cap the interest being sought by investors.

A total of P6.873 billion worth of 91-day Treasury bills (T-bills) were issued, below the P8-billion target, at a rate of 1.773 percent. The rate was higher than the previous auction’s 1.491 percent, but below 1.809 percent if a full award was made.

For six-month debt papers, only P4.646 billion out of P6 billion was awarded. The rate rose to 1.806 percent from 1.507 percent in the last auction.

Had the government awarded all 182-day papers, it would have paid 1.853 percent in interest.

Bids for one-year papers, meanwhile, were rejected after rates went up to 2.232 percent from the previous auction’s 1.878 percent. The government tried to cap the rate at 2.2 percent initially, but decided to cancel it altogether.

“Tenders required a pick-up in rates because of the indications in the Fed announcement,” National Treasurer Roberto Tan told reporters after the auction.

“It changed the view of many market analysts and point more to a probable increase in Fed rates arising in December,” he added.

Last week, the US Federal Reserve kept policy rates unchanged at near-zero levels, but provided more clues as to the direction of interest rates going forward. The Fed has not hiked rates since 2006.

Investors are flocking to the US – the world’s safe haven – over prospects of higher rates, which in turn had left emerging markets like the Philippines suffering from capital outflows.

Higher US rates serve as benchmark for most countries.

Sought for comment, a bond trader agreed with Tan, but added it is also possible that investors are “positioning themselves” ahead of the holidays during the summit of the Asia-Pacific Economic Cooperation (APEC).

“Some of the cautiousness also come from the upcoming APEC summit because if you want liquidity, you would not be that aggressive on placing funds in bonds or if you do, you do that with a higher rate,” the trader said in a phone interview.