Treasury junks bids for 2011 debt papers

04/23/2008

The Bureau of Treasury rejected all bids at an auction of 2011 bonds yesterday after banks sought unusually high yields.

Acting Treasurer Roberto Tan told reporters that banks had put in “throw-away bids” since they were apparently not keen to buy just two days ahead of a Monetary Board meeting.

“They are probably waiting for the result of the central bank meeting,” he added. “They are trying to get a clearer picture of inflation expectations.”

The Monetary Board holds a policy meeting tomorrow which it is expected to leave interest rates unchanged in the face of an increase in inflation.

Some economists have said the bank may raise rates later in the year. At the auction, the Treasury put on the block P7 billion of the domestic bond, originally issued as five-year paper in 2006. The bond has a remaining life of three years and six months.

Only P2.98 billion of bids was recorded with the average rate at 7.711 percent.

The closest comparison is the average rate on the four-year bond at the last successful auction on Dec. 11, which was 5.876 percent.

Tan attributed the banks’ less appetite for the debt paper to the rising inflation, as well as the would be decision of the central bank’s policy-making body Monetary Board this Thursday after its policy meeting.

“It’s not a liquid bond,” he added, referring to the debt paper that has a remaining life of three years and six months.

Meanwhile, about P960 million of three-month Treasury bills would mature this week.

The auction committee has been rejecting bids in majority of its auctions since the start of the year due to high rates asked by banks, which affects the government’s borrowing program for the year.

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