The Bureau of Treasury rejected all bids for 91- and 364-day treasury bills after banks demanded higher yields in anticipation of a wider-than- expected budget deficit this year.

National Treasurer Roberto Tan said the bureau rejected unreasonable bids to prevent interest rates from rising and made a partial award for the 182-day debt papers.

?The message is very much screaming with the auction results today [yesterday]. We can afford to reject because of our healthy cash position,? Tan said.

Had the auction committee made a full award, the yield of the 91-day T-bills?used by banks in pricing their loans? would have gone up by 37.3 basis points to 4.667 percent from 4.294 percent on January 26. Bids for the P1-billion issuance reached P1.11 billion.

The one-year debt paper would have fetched 5.829 percent or 106.8 basis points higher than 4.761 percent on Jan. 26 had the auction committee made a full award of P3.5 billion. Tenders for the 364-day T-bills reached P7.505 billion.

Meanwhile, the committee accepted P1.3 billion worth of bids for 182-day T-bills at an average of 4.625 percent, or 6 basis points higher than 4.565 percent on Jan. 26. Bids for the P2.5 billion offering amounted to P6.02 billion.

Had the committee made a full award, the yield of the paper would have increased by as much as 24.6 basis points to 4.811 percent.

?The market is testing the government,? Tan said.

The treasury also rejected all bids for the 91-, 182-, and 364-day T-bills during an auction on Feb. 9.

Tan said the treasury could well afford to reject unreasonable bids because of its ?healthy? cash position.

?We are managing our cash flow very effectively,? Tan added.

Investors asked for higher yields after the Development Budget Coordination Committee met on Friday to approve changes in the macroeconomic assumptions and fiscal targets this year in light of the global economic slowdown. Lawrence Agcaoili