Government plans P230-B domestic borrowings in Q3

MANILA, Philippines — The national government plans to raise P230 billion from the issuance of domestic government securities in the third quarter, according to the Bureau of the Treasury (BTr).

In a memorandum posted in the BTr’s website, National Treasurer Rosalia de Leon informed all government securities eligible dealers (GSEDs) that the agency is set to auction off P90 billion worth of Treasury bills (T-bills) and P140 billion worth of Treasury bonds (T-bonds) from July to September for a total volume of P230 billion.

This is almost 27 percent lower than the P315 billion domestic borrowing program set in the previous quarter, and 23.3 percent down from P300 billion in the third quarter of 2018.

De Leon had earlier indicated the BTr would cut the government’s domestic borrowing program for the third quarter due to healthy cash buffer of government, following the success of its fund raising activities both in the onshore and offshore markets in the past six months.

This came as government spending suffered due to the delay in the passage of the 2019 national budget.

De Leon also explained that only a small portion needs to be raised by the government under its onshore borrowing program for 2019, which is set at P891.7 billion.

With the cut in the volume of borrowings, the BTr also reduced the frequency of its auctions.

Auctions for T-bills will be held every other Monday of the second quarter from July 8 to Sept. 16. This is less frequent that the weekly T-bill auctions held in the previous quarters.

Each auction will have a total volume of P15 billion, comprised of P4 billion in 91-day securities, P5 billion in 182-day and P6 billion in 364-day T-bills.

Meanwhile, T-bond auctions will be held on Tuesdays of every other week, from July 2 to Sept. 24.

Second quarter T-bond offerings involve more tenor buckets, starting from three years, seven years, 10 years and 20 years, each with a total size of P20 billion.

According to Security Bank chief economist Robert Dan Roces, the BTr’s move to reduce its third quarter borrowing program came amid expectations of easing interest rates.

“The BTr is expecting borrowing costs to continue easing, thus compelling them to trim their offering for the third quarter. This after the BSP (Bangko Sentral ng Pilipinas) kept policy rates unchanged last week and enacted a ‘prudent pause’ to await further confirmation from data that inflation would indeed head lower; forecasts from the central bank have already been downgraded,” Roces said.

The national government borrows from both local and foreign creditors to plug its fiscal deficit, which is currently capped at 3.2 percent of the gross domestic product (GDP) this 2019.

For 2019, the Philippines’ borrowings is programmed to increase to P1.19 trillion from P986 billion last year in expectation of the higher fiscal deficit. A total of P891.7 billion of this amount is expected to come from domestic lenders.