BTr may suspend sale of government securities for 2 weeks

The Bureau of Treasury (BTr) is considering the possibility of giving the market a two-week breather and give time for the prevailing jitters to dissipate before resuming the auction for government Treasuries and other securities.

Despite the volatility of the market, finance officials said there is still no need to shift the borrowing mix from heavy domestic borrowing to more foreign borrowing.

National Treasurer Sergio Edeza said the market is still under control and only needs a breather from the stresses that came in the wake of the threat of sanctions by Financial Action Task Force, the worsening uncertainty over the US-Iraq situation and the market’s lukewarm reaction to the government’s E500 million Eurobond offer.

After canceling today’s auction for the five-year bonds, Edeza said the tension in the market is palpable and the auction committee is also thinking of canceling the Treasury bills auction next week.

"The market is still beset with a lot of fears. We have to listen to the market and accommodate these fears," Edeza said. "They need a breather."

Edeza said the Treasury and bonds market would probably need at least two weeks to settle down, adding that the government has enough ready cash to be able to afford to cancel the auction.

Out of the Euro500 million worth of Eurobonds on offer last week, the government was only able to raise Euro350 million but Edeza said this was enough to give the government the cash support that it needed.

"We don’t have to borrow from offshore yet and the proceeds from the Eurobond float came in last Friday. We have cash," he said. "We can afford to wait until all these market fears dissipate."

The plan to cancel auctions for at least two weeks came in the wake of the tumultuous Treasury bills auction on Monday last week when the auction committee rejected all bids for all tenors as banks attempted to push rates up by as much as 111 basis points.

The auction committee led by the BTr has already canceled the auction for the BTr’s P3.5 billion five-year bond auction market attempts to jack up the interest rates for the government’s long-term bonds.

"If the market is allowed to trade in this condition, they’ll just make throwaway bids and we’ll end up rejecting them anyway," Edeza pointed out. "So we might as well cancel the auction altogether."

Despite the urge of the market to jack up interest rates, Edeza said the government had no intentions of shifting its borrowing mix for 2003.