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THE government on Tuesday rejected bids for seven-year Treasury
bonds or IOUs it had planned to sell after investors sought high
rates.
Had the government accepted banks’ bids, the
yield for the re-issued seven-year T-bond would have risen to 8.818
percent from the 8.495 percent during the last successful auction on
June 3.
The government was set to sell P7 billion of the
debt papers.
“I think this is due to inflation
expectation,” National Treasurer Roberto Tan told reporters after
the auction.
Bids reached P10.207 billion, with the
debt-paper’s remaining life of four years and eight months.
The Bangko Sentral ng Pilipinas (BSP) earlier
said inflation last month may have risen to between 10.4 percent and
11.2 percent on the back of surging world oil prices, and higher
wage and cost of living allowance adjustments.
BSP Deputy Governor Armando Suratos said
increases in the prices of rice, fruits and vegetables bolstered the
central bank’s expectations of higher inflation last month.
“Higher cost of imported commodities [was
also] due to [a] depreciating peso,” he said.
Price increases in May accelerated to a
nine-year high of 9.6 percent, prompting the central bank last month
to revise its full-year forecast to between 7 percent and 9 percent,
higher than the target of 3 percent to 5 percent.
The BSP also raised its overnight borrowing and
lending rates by 50 basis points, citing second-round effects of
inflation. The Bureau of Treasury meanwhile had canceled the auction
of short-term debt papers in the second quarter due to unreasonably
high bids, forcing the government to resort to negotiated sale of
the said T-bills.
Tan said the treasury bureau is also seeking
proposals on its plan to issue retail T-bonds (RTBs) to finance
P33-billion worth of maturing obligations this month.
“We’re just requesting for [a] proposal.
What they think is the appropriate timing, tenor and volume for the
issue,” he said.
The Philippines last offered RTB’s in July
last year, selling P50-billion worth of three- and five-year debt
papers. It had planned to sell only P40 billion of the IOUs. Banks
are required to on-sell RTB’s to retail investors, as against the
institutional investors that usually buy the regular T-bills and
bonds.
-- Chino S. Leyco
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