Gov’t sets more borrowings for Q1 2017

MANILA, Philippines - The government will borrow more domestically in the first three months of 2017 to lock in better rates amid a rising interest environment.
In an announcement on its website, the Bureau of the Treasury said it would sell P180 billion in Treasury bonds and bills, divided equally, from January to March.

This is up from P135 billion sold in the last quarter of 2016.

Offerings will be done on a weekly basis, a shift from the present twice-a-week floatations.

“More frequent auctions allow for more opportunities to take advantage of investor sentiment when it is positive, under current uncertain market conditions,” National Treasurer Roberto Tan said in a text message on Thursday.

The government borrows from the local and international markets to bridge its budget deficit and pay its existing debts.

Locally, T-bonds and T-bills are issued to borrow. They are investment instruments paid with a specific interest over a period of time.

For the first quarter, T-bills will be offered at P15 billion each offer period. It will be divided at P6 billion for 91-day, P5 billion for 182-day and P4 billion for 364-day.

T-bonds, meanwhile,  will have maturities of three and five years, which will be sold at P15 billion each offer week.

Tan admitted the government may have to pay more for its financing requirements as rates are poised to go up after the US Federal Reserve hiked its lending rates this month.

Higher interest rates do not bode well for the government as this means it will have to shell out more money for debt payment, instead of using them to finance projects.

“We are, however, hopeful that market confidence will start to build up with more clear forward guidance coming out of the Fed...and greater certainty on (US president-elect Donald) Trump’s economic policy unraveling,” Tan said.

He added the first-quarter borrowing program was finalized in consultations with investors trading with the government.

For next year, the national government is poised to borrow 9.22-percent lower than this year at P631.29 billion, according to budget data.

Broken down, the bulk of credit will be peso-denominated and raised through T-bonds and T-bills at P505.03 billion.

Sought for comment, Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said more auctions are not likely to temper rate expectations, not with other investment outlets available.

“The increased frequency should translate to higher rates as it competes with TDFs (term deposit facility) and other private offerings,” Neri said in an e-mail.

The central bank allows investors to park short-term funds in Term Deposit Funds every week in a bid to siphon off excess liquidity that stokes inflation. Rates on seven- and 28-day TDFs have been rising in recent weeks.

“Market will not part with funds unless rates are higher,” he said.