Traders cited talk in the market that the budget deficit may be higher than expected for January to August. The Department of Finance (DOF) will announce the deficit figure later this week.
The Bureau of Treasury (BTr) rejected all bids at the previous T-bills offering on September 1 after a July 27 mutiny by renegade soldiers fueled a rise in interest rates and pushed the peso near its all-time low of 55.75 to the dollar.
The 91-day T-bill, at the last successful auction on Aug. 18, fetched an average rate of 5.225 percent. The 182-day had an average rate of 6.367 percent and the one-year paper fetched 6.905 percent.
BTr deputy treasurer Mina Figueroa said the government’s cash position was still huge, indicating that the auction committee could still afford to reject bids it if had to.
"We always said we will allow rates to align with the secondary market," Figueroa said. "But our cash position is huge so we are still studying the possibility of reducing the volume of offer for the last quarter."
At yesterday’s auction, rates for the 182-day T-bills stood at 6.511 percent while that of the 364-day T-bills averaged at 7.098 percent.
The market showed noticeable preference for the 182 and 365-day treasury bills, with tenders amounting to P4.150 billion and P3.755 billion, respectively.
"If you look at the yield curve, banks found the 182 and 365-day bills more attractive," Figueroa said.
Government has already scrapped all its December offers and the BTr is planning a further reduction in its fourth quarter offer as the treasury’s cash position remained strong following the success of its retail treasury bond offer that raised a total of P74.31 billion.
The national government is also poised to raise at least $500 million from the foreign credit market to fund its residual requirements for the remainder of the year as well as pre-fund part of its requirements for next year.
The government aims to cap its budget deficit for 2003 at P202 billion, equivalent to about 4.7 percent of its projected gross domestic product for the year.
For January to July, the country recorded a shortfall of P95.4 billion, lower than the projected P119 billion.
The Philippines, the largest sovereign debt issuer in Asia outside of Japan, shocked investors in 2002 by breaching its deficit target three times due to poor tax collection.