The Philippine Bureau of Treasury rejected all bids for the 91-day and 364-day T-bills at a regular auction on Monday after banks demanded a higher premium for the debt papers.
According to National Treasurer Roberto Tan, the bureau rejected unreasonable bids to prevent interest rates from rising. Tan said the treasury can afford to reject such bids due to its "healthy" cash position.
Two weeks ago, the Bureau of Treasury has rejected all bids for the 91-day, 182-day, and 364-day T-bills.
"We are managing our cash flow very effectively," Tan said.
However, Tan said they have made a partial award for 182-day debt papers.
Banks bid an average of 4.67 percent for the P1 billion of 91-day T-bills. On the other hand, total of P3.5 billion of the 364-day bills were on sale and a full award would have resulted in an average rate of 5.829 percent or 106.8 basis points higher than 4.761 last January 26.
The auction committee also accepted P1.3 billion worth of bids for 182-day T-bills at an average 4.625 percent, and a full award would have resulted in an average rate of 4.811 percent or 24.6 basis points.
"The market is testing the government," Tan said.
Last week, the government announced that the Philippines is expected to incur a budget deficit this year of P160 billion or 2 percent of the country's gross domestic product (GDP) instead of the revised target of P102 billion or 1.2 percent of GDP.
The government initially expected a P40-billion budget deficit or 0.5 percent of GDP this year from last year's P75 billion or 1 percent. With Reuters