MANILA – The government rejected Tuesday all bids for the seven-year Treasury bond (T-bond) after banks asked for high rates on account of uncertainties overseas.

The Bureau of the Treasury (BTr) offered the debt instrument for P9 billion and tenders only amounted to P5.965 billion.

"The market is risk-averse given the global developments," National Treasurer Roberto Tan told reporters after the auction.

Had the auction committee awarded the debt paper, average rate would have been higher than the 4.999 percent that the debt paper fetched on April 24, 2012.

Had the auction committee awarded the instrument based on the total tenders, the average rate of the bond would have risen to 5.334 percent.

If it was awarded for P2.505 billion, average rate would have increased to 5.218 percent and to 5.175 percent if it was awarded for P1.185 billion.

Tan said banks that offered bids during the auction are "fence-sitting (and) just giving very protective rates" amid the deceleration of inflation rate in April to 2.9 percent compared to month-ago's three percent.

"I guess they're waiting on how the domestic market will react to global events," he said.

Meanwhile, Tan said the government already lent about P7-8 billion to state-run Power Sector Assets and Liabilities Management Corp. (PSALM) last May to fund its operations this year.

He said the government will continue to finance PSALM's requirements either through regular funding or auction and stressed that no special fund raising is being eyed yet for PSALM alone.

He said they may tweak the volume of the regular auctions to accommodate PSALM's requirements and this will reflect as borrowing of the government.

He, however, stressed that the financing will be paid back by PSALM.

The government will continue to extend financing to PSALM, he said, but cited that this will depend on the P30 billion drawdown schedule that the entity will submit to the BTr.*PNA