Government sets P360-billion borrowings in first quarter 2019

MANILA, Philippines — The national government plans to raise P360 billion through the issuance of Treasury bonds (T-bonds) and Treasury bills (T-bill) in the first quarter of 2019, the Bureau of the Treasury (BTr) announced yesterday.

In an advisory addressed to all government securities eligible dealers (GSEDs), the BTr said it is set to float P240 billion worth of T-bills and P120 billion worth of T-bonds from January to March next year, for a total domestic borrowing program of P360 billion.

National Treasurer Rosalia De Leon said this is slightly higher than the P340 billion borrowing program for the fourth quarter of 2018, which also includes tap facility offerings during the period.

This is likewise higher than the P240 billion borrowing program set in the same quarter of 2018.

According to De Leon, there was a slight increase in the government’s borrowing program given the projected increase in market demand amid lower inflation expectations.

“There are expectations that inflation would be dropping, and of course, rates would also be trending downward, so there would be more participation in the auctions,” the national treasurer said in a phone interview.

Based on the schedule posted by the BTr, auctions for T-bills will be held every Monday of the first quarter from Jan. 7 to March 25.

Each auction will have a total volume of P20 billion – higher than the previous weekly volume of P15 billion – comprised of P6 billion in 91-day securities, P6 billion in 182-day and P8 billion in 364-day T-bills.

Meanwhile, T-bond auctions will be held on Tuesdays of every other week, starting from Jan. 8 to March 26.

Tenor buckets include three years, five years, seven years, 10 years and 20 years, each with a total size of P20 billion. This is also higher than the previous volume of P15 billion for each tenor.

De Leon said the 20-year T-bonds would be back in the program as GSEDs would now want to lock in their funds in long-term securities given the expected decline in interest rates. The last time the BTr issued 20-year debt papers was on June this year.

“Rates are already declining, so for (investors), they would already want to lock in at the long end. And on our end, we also want to go in that direction given that we have not really issued on that long end part of the curve,” she said.

The national government borrows from both local and foreign creditors to plug its budget deficit.

For 2019, the country’s borrowings is programmed to increase to P1.19 trillion from this year’s P986 billion in expectation of the higher fiscal deficit next year.

The Development Budget Coordination Committee (DBCC) – composed of the Department of Finance, Department of Budget and Management, National Economic and Development Authority, and Bangko Sentral ng Pilipinas – earlier raised the country’s fiscal deficit ceiling to P624.73 billion for 2019, equivalent to 3.2 percent of the projected gross domestic product (GDP).

This is higher than the current ceiling, which is three percent of GDP.