Jan 052015

MANILA, Philippines – The government rejected all bids for the 91-day and 364-day Treasury bills (T-bills) due to the unreasonably high interest rates sought by banks.

The Bureau of the Treasury,  however, sold P4.7 billion worth of six-month debt papers, or a little more than half of the planned P8-billion issuance.

The yield on the 182-day bills went up by five percentage points to 1.82 percent.  Tenders amounted to P8.96 billion.

National Treasurer Rosalia De Leon said the rates sought by banks were “way way above where they should be.”

Had it accepted the bids, the rate of the 91-day bills would have risen by  89 percentage points from 1.42 percent to 2.31 percent.  Tenders reached only P6 billion, short of the P8-billion planned offering.

The rate  for the 364-debt paper would have risen by 21.9 percentage points to 2.059 percent.  Bids amounted to P7.2 billion, 20 percent more than the P6 billion on offer.

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“No reason for rates to drastically rise.  They’re asking for much bigger increase in rates,” De Leon said.

The government has programmed to sell P135 billion worth of debt instruments in the first quarter of the year as part of a fund-raising initiative to augment its expenditure requirements.

About 86 percent of the government’s borrowing requirements will come from the domestic market while the balance of  14 percent will come from international lenders.

Foreign borrowings are done through the sale of sovereign bonds in the international capital market and by securing cheap loans, in the form of official development assistance (ODA), from multilateral development institutions.

The government borrows funds to pay maturing obligations and plug the deficit in its budget.

The country is planning  to tap the global bond market in the first quarter to support its spending program.  Deutsche Bank and HSBC were reportedly tapped as joint global coordinators for the issuance of $1 billion worth of sovereign bonds.

The two banks will also be joint bookrunners alongside Citigroup, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley, Standard Chartered and UBS.

The Philippines has aggressively pursued debt management schemes, including issuing local currency-denominated global bonds, to reduce its debt as a percentage of gross domestic product.

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