Government rejects bids for 91-day T-bills

The government rejected yesterday all bids for the 91-day Treasury bills (T-bills) as banks submitted unreasonably high offers amid uncertainties in the global financial markets.

Investors want higher returns for their money given the uncertain economic tide, Deputy Treasurer Eduardo Mendiola told reporters after the auction.

Banks offered an average of 6.276 percent for the P2.5 billion worth of 91-day T-bills on offer, against the 5.699 percent at the last auction of the paper on July 7.

“It is common knowledge what is happening in the international market so people are holding on to their liquidity,” he said. Had the government’s auction committee accepted the bids, the average rate of the three-month paper would have gone up to 6.276 percent, 57 basis points higher than the previous rate of 5.699 percent.

On the other hand, the committee accepted bids for the 364-day T-bills, allowing the average rate to increase to 6.520 percent or 2.5 basis points higher than the previous rate of 6.495 percent.

The government awarded P1.2 billion out of total tenders of P4.905 billion.

The rate of the one-year paper would have increased to 6.699 percent or 17 basis points higher than the previous rate of 6.495 percent had the auction committee awarded P2.5 billion worth of the paper.

Mendiola said the auction committee only awarded at a rate that was within the levels at the secondary market.

He said people are holding on to their cash amid tight liquidity around the globe brought about by the effects of the credit crunch in the US.

Nevertheless, Mendiola said that the goverment’s cash position remains strong.

The US financial meltdown, brought about billions of losses from the credit crunch in its mortgage market, has led to the collapse of big financial institutions. Investment banks Merrill Lynch and Lehman Brothers have gone bankrupt while US insurer American International Group also revealed that it was having liquidity problems.