The Philippines: Gov’t rejects bids for reissued 10-year T-bonds

  • THE GOVERNMENT on rejected all bids for reissued 10-year Treasury bonds as rates went up after Nov 21 inflation exceeded market expectations.
  • The Bureau of the Treasury turned down all tenders at the auction for the securities, which have a remaining life of nine years and seven months.
  • The bureau did not award the bonds even as tenders reached PHP42.44bn, more than twice the PHP20bn up for auction. These were still lower than the PHP55.37bn in bids the last time these were sold on 9 Nov 21.
  • Had it fully awarded the bonds, the average yield would have declined by 5.9 basis points to 5.071%.
  • This would have been higher than the 4.99% quoted for 10-year bonds at the secondary market before the auction, based on PHP Bloomberg Valuation Service Reference Rates posted on the Philippine Dealing System’s website.
  • National Treasurer Rosalia V. de Leon said the tenders got rejected because of high bids even as Nov 21 inflation eased to 4.2%, the slowest since Jul 21 and the third-straight month of easing.
  • The government has consistently expressed its accommodative stance to support the economic recovery, she told reporters in a Viber group message.
  • A bond trader noted that while the auction had been oversubscribed, the Treasury rejected all bids after rates submitted by the market were slightly higher than those in the secondary market.
  • “With the consumer price index for November above market expectations and BSP Governor Diokno reiterating some upside risks to inflation next year, traders and investors priced in accordingly,” the trader said in a Viber message.
  • “Speculations on the pace of US Fed tapering were also weighing on sentiment in the bond market.”
  • Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said risks for next year include typhoons that could lead to higher food prices.

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