NG to borrow PHP 437B locally in Q4 

The National Government (NG) is looking to borrow PHP 437 billion from the domestic market in the fourth quarter, the Bureau of the Treasury (BTr) said on Thursday.

In a notice on its website, the BTr said it seeks to borrow PHP 262 billion through the issuance of Treasury bills (T-bills) and PHP 175 billion through Treasury bonds (T-bonds) in the October-to-December period.

The borrowing plan for the fourth quarter is 36.6% lower than the PHP 690-billion borrowing plan for the third quarter.   

It is also 31.45% lower than the PHP 637.448 billion that the government actually raised in the July-to-September period.

“Our bond auctions will be biweekly but the tenor will be dual, similar to what we’ve been doing for the three- and 20-year bonds,” National Treasurer Sharon P. Almanza said in a Viber message.

Ms. Almanza said the breakdown of amounts per tenor for T-bills and T-bonds will be announced in the weekly notice of offering.

For October, the NG plans to borrow P180 billion domestically, consisting of PHP 110 billion in T-bills and P70 billion in T-bonds.

The government will hold auctions for T-bills on Sept. 29, Oct. 6, Oct. 13, Oct. 20 and Oct. 27. It seeks to raise PHP 22 billion from the sale of 91-day, 182-day and 364-day T-bills from each of these auctions in October, but no breakdown was given.

For the Sept. 29 auction, the BTr will raise PHP 7.5 billion each from 89-day and 182-day papers, as well as PHP 7 billion from 364-day T-bills.

For longer-dated offerings, the BTr will auction off PHP 35 billion worth of three-year and 10-year bonds on Oct. 7, and PHP 35 billion worth of seven-year and 25-year bonds on Oct. 21.

For November, the government is looking to borrow PHP 158 billion from the domestic market, composed of PHP 88 billion from T-bills and PHP 70 billion from T-bonds.

The NG seeks to raise PHP 22 billion from each of the four auctions scheduled on Nov. 3, 10, 17 and 24. It will offer 91-day, 182-day and 364-day T-bills at these auctions, but no specific breakdown was given.

The government will offer five-year and 10-year bonds worth PHP 35 billion on Nov. 4, and seven-year and 20-year bonds worth PHP 35 billion on Nov. 18.

In December, the NG will borrow PHP 99 billion from the domestic market, composed of PHP 64 billion from T-bills and PHP 35 billion from T-bonds.

The government is looking to raise PHP 22 billion from the offering of 91-day, 182-day and 364-day T-bills at the Dec. 1 and 8 auctions, and PHP 20 billion at the Dec. 15 auction.

The government scheduled only one T-bond auction in December. It will sell three-year and 10-year bonds on Dec. 2, with the goal of raising PHP 35 billion.

There are less auctions in December to take into account the holiday season.

A trader said demand is expected to be strong in the fourth quarter, while yields could ease further due to the lower supply of bonds relative to the previous quarter’s offering.

“This is a welcome development for investors as there will be choices in terms of tenors.

“Also, expect rates to trend lower since we only have bi-weekly bond auctions next quarter. There should be strong demand given the relatively lower supply,” the trader said.

The trader noted that the BTr will conduct dual bond offerings in the October-to-December period to address demand for short and long tenors, and since the government has almost completed its borrowing plan for the year due to the retail Treasury bond (RTB) offering.

However, the trader expressed concern that investor confidence could be dampened by the ongoing corruption scandal involving anomalous flood control projects.

“Not sure also if it will be something good for our image given that we want to be included in the JPMorgan bond index,” the trader said.

JPMorgan this month tagged Philippine peso-denominated government bonds as “Index Watch Positive,” which is the final review phase for inclusion in its Government Bond Index for Emerging Markets series.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the lower borrowing program for the fourth quarter has been a consistent trend amid lower maturities and due to less working days during the holiday season.

However, he said the widening budget deficit and lower interest rates may increase the share of domestic borrowings in the government’s total borrowing mix.

Latest BTr data showed gross domestic debt stood at PHP 1.34 trillion as of end-July.

This was composed of PHP 881.84 billion in fixed-rate Treasury bonds, PHP 300 billion in fixed-rate Treasury notes and PHP 159.85 billion in Treasury   bills.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at PHP 1.56 trillion or 5.5% of gross domestic product this year. — Aaron Michael C. Sy, Reporter