THE GOVERNMENT rejected all bids for the reissued Treasury bonds (T-bonds) it offered on Tuesday amid weak demand and as players asked for higher yields due to lingering geopolitical concerns.
The Bureau of the Treasury (BTr) did not award the reissued 10-year bonds it auctioned off as total demand reached just P18.057 billion, below the P30 billion on offer.
With this, the total outstanding volume for the series remained at P239.5 billion, the Treasury said in a statement.
Had the government accepted all the tenders made for the papers, which have a remaining life of seven years and one month, the issue would have fetched an average rate of 7.575% as bid yields ranged from 7% to 8.3%.
This average yield would have been 79.6 basis points (bps) higher than the 6.779% fetched for the bond series’ last award on June 16 and 95 bps above the 6.625% coupon for the issue.
This was also 45.4 bps above the 7.121% fetched for the same bond series and 41.5 bps higher than the 7.16% quoted for the seven-year paper — the benchmark tenor closest to the remaining life of the issue — at the secondary market before Tuesday’s auction, based on the PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.
The BTr rejected all bids for the T-bonds as the average yield would have been higher than secondary market rates and beyond market expectations, the first trader said in a text message.
“Demand was low overall and most bids were concentrated at the higher end, causing BTr to reject all bids at the auction.”
“All the P18.057 billion total bids for the seven-year Treasury bonds were rejected since [the offer was] undersubscribed… [and] amid relatively high bid yields,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
He added that the market asked for higher yields to track the rise in US Treasuries due to renewed tensions in the Middle East.
Yields at the secondary market mostly traded higher on Tuesday due to the escalating Middle East conflict, the second trader said in an e-mail. “Players trimmed positions ahead of today’s seven-year auction on fears that it will reprice the market higher.”
Oil futures surged nearly 9% on Monday and equities fell as conflict between the United States and Iran reignited over the weekend, once again throttling the flow of goods through the key Strait of Hormuz, Reuters reported.
Over the weekend, Tehran had said it closed the strait, a vital global artery for oil-and-gas shipping. President Donald J. Trump responded on Monday by saying the US was reinstating its blockade of Iranian shipping in the Gulf.
Mr. Trump also promised to keep the strait open for a fee, though the US has not been able to wrest control of the waterway from Iran since the outset of the war at the end of February.
The revival of the blockade jolted oil markets that had already been rallying after the two sides had exchanged missile and drone attacks over the weekend. US crude settled up 9.4% or $6.73 to $78.14 a barrel while Brent settled at $83.30 per barrel, up 9.6% or $7.29.
US Treasury yields rose as US-Iran hostilities and rallying oil prices fanned concerns about inflation pressures and their potential effect on US Federal Reserve monetary policy.
The yield on the benchmark US 10-year note rose 5.06 bps to 4.62% from 4.569% late on Friday. The 30-year bond yield rose 3.31 bps to 5.104%. The two-year note’s yield, which typically moves in step with Federal Reserve interest rate expectations, rose 6.71 bps to 4.275%, hitting its highest yield since February 2025.
The BTr wants to raise P410 billion from the domestic market this month or P250 billion via Treasury bills and P160 billion through T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.659 trillion or 5.4% of gross domestic product this year. — A.M.C. Sy with Reuters