THE Bureau of the Treasury rejected all bids for P35 billion in reissued 20-year Treasury Bonds (T-bonds) on Tuesday’s auction as rates shot up following reports that the US Federal Reserve may taper off its bond purchases.
If the Treasury fully awarded the tenor, bid rates would have averaged 4.533 percent, soaring by 34.6 basis points from 4.187 percent in the previous auction.
Total bids for the security hit P46.12 billion.
With a remaining life of 11 years and 7 months, the security is set to mature on March 21, 2033. It has a coupon rate of 3.625 percent.
National Treasurer Rosalia V. De Leon told reporters they fully rejected bids as rates went far beyond the secondary levels.
De Leon added that the rates were “unreasonably way above secondary levels.”
“Markets pricing in possible start of taper following Fed minutes,” De Leon told reporters.
Federal Reserve Chairman Jerome Powell is expected to deliver a speech in the annual Jackson Hole symposium later this week. Investors expect Powell to provide hints on the next policy move by the central bank.
For August, the Treasury has set to borrow P200 billion from the local debt market, slightly lower than the P235 billion it programmed in July.
This year, the national government programmed to borrow a total of P3.1-trillion, of which around 75 percent is expected to be raised through domestic sources.
The outstanding debt of the national government has already piled up to P11.166 trillion as of end-June this year, swelling by 23.3 percent from P9.054 trillion a year ago.
This year’s ratio of debt to gross domestic product (GDP) is forecasted by finance officials to rise to 59.1 percent from 54.6 percent in 2020. It is also expected to peak next year at 60.8 percent—slightly above the internationally accepted threshold—before gradually tapering off to 60.7 percent and 59.7 percent in 2023 and 2024.
Prior to the pandemic, the government notched a record-low debt-to-GDP ratio of 39.6 percent in 2019.
The Department of Finance is projecting that the government’s debt-to-GDP ratio will return to the pre-pandemic level by 2024 or 2025 if their recommended fiscal measures will be passed early by the next administration and if the economy quickly recovers.