Government sets P585 billion borrowings in Q2

MANILA, Philippines — The government is set to borrow P585 billion from the domestic market in the second quarter amid hopes of more favorable interest rates here and abroad.

In a memorandum to all government securities eligible dealers, the Bureau of the Treasury said it intends to raise the amount from both short-term T-bills and long-term T-bonds from April to June.

The government is set to auction off P195 billion in T-bills via the 91-, 182- and 364-day tenors.

It will also raise P390 billion from T-bonds with maturities of three to 20 years.

The Treasury holds the auction of short-dated T-bills every Monday and T-bonds every Tuesday.

The second quarter borrowing plan is the same program as the first quarter.

However, the government managed to raise only 81 percent or about P472.3 billion from the plan.

One more T-bond auction for the quarter is pending today, which could bring total domestic borrowings to P502.3 billion.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the borrowing program may have to do with the planned global bond issuance in the second quarter, which could temper the need for more local borrowings.

Ricafort added that debt markets are also anticipating possible rate cuts by the US Federal Reserve as early as June.

Such a move could be matched locally and lead to lower T-bill and T-bond yields over the coming months.

“The strategy for many years is to have a bigger share of local borrowings versus foreign to reduce forex (foreign exchange) risks involved in external debt,” Ricafort said.

Meanwhile, the Treasury yesterday fully awarded the entire P15 billion of T-bills on offer. This is the last short-term auction for the month and for the first quarter.

Yields for the three tenors declined across the board in reference to last week’s rates, as well as that of the secondary market.

Rates for the 91-day offer slipped by 6.5 basis points to 5.71 percent from the secondary level of 5.775 percent and were lower than the last auction rate of 5.744 percent.

Yields averaged 5.88 percent for the 182-day T-bills, 3.9 basis points below the secondary rate and also down from last week’s 5.916 percent.

The 364-day short-dated debt papers saw rates at 5.982 percent, down by 8.3 basis points from the reference rate of 6.065 percent and way below last week’s level of 6.033 percent.

The Treasury awarded P5 billion in each tenor.

T-bill demand went up by seven percent week-on-week to reach P50.51 billion. The auction was oversubscribed by 3.36 times.

Bids went up to P15.4 billion and P15.77 billion for the three-month and six-month offers, but slightly declined to P19.33 billion for the one-year tenor.