Treasury to borrow P200 billion more from local mart

MANILA, Philippines — The government plans to borrow another P200 billion this month from domestic investors through the auction of short-dated securities, taking advantage of higher demand triggered by inflation fears.

The Bureau of the Treasury yesterday announced it would auction P140 billion in Treasury bonds (T-bonds) and P60 billion in Treasury bills (T-bills) to boost the state’s resources in managing the pandemic.

National Treasurer Rosalia de Leon told The STAR they decided to extend the borrowing volume of at least P200 billion monthly, noting that the domestic market remains highly liquid.

However, she said the agency moved the maturity options to between five years and seven years this time to balance its previous offerings. In September, the Treasury issued two 10-year T-bonds along with two seven-year debt papers and a five-year security.

Further, the Treasury auctioned $400 million in retail dollar bonds (RDBs) for the first time in an effort to accommodate demand from dollar holders, including overseas Filipino workers. The RDBs attracted a bid total of $938.2 million, oversubscribing the sale by more than twice.

The Treasury awarded $551.8 million for the five-year RDBs, yielding 1.28 percent and $314.4 million for the 10-year RDBs earning 2.14 percent.

“Program is on intermediate part of curve following last month issuances were on long-end (like) 10 years, including RDB,” de Leon said.

Likewise, she said the Treasury expects investors to swarm the October auctions in a display of excess liquidity despite several concerns here and abroad.

On the domestic front, inflation, or the general increase in commodity prices, rose by 4.9 percent in August – the highest since December 2018 – on cost hikes in food and fuel. Inflation has now averaged 4.4 percent, above the government’s target range of two percent to four percent.

Overseas, investors monitor how the impending taper in November will affect bond yields. The US Federal Reserve announced it would begin rolling back monetary support to the  economy leading up to interest rate hikes by 2023, at the latest.

“Demand will remain strong with good liquidity onshore and (we) expect inflation to trend back to two percent to four percent band with the implementation of non-monetary measures,” de Leon said.

For October, the Treasury will auction P15 billion in T-bills with tenors of 91 days, 182 days and 364 days every Monday and P35 billion in T-bonds every Tuesday.