THE government will still try to borrow P200 billion from the local debt market in July, the first month of the incoming Marcos administration, despite investors’ relentless demand for high rates.
The Bureau of the Treasury (BTr) will be auctioning off next month P140 billion in Treasury Bonds (T-bonds) and another P60 billion in Treasury Bills (T-bills) to raise the amount.
Based on the schedule released by the Treasury, P35 billion in T-Bonds will be offered on each auction day for all four Tuesdays of the month. Reissued 4-year T-bonds will be offered on July 5 while 7-year debt papers will be sold on July 12. Apart from these, 10-year and 14-year T-bonds will be auctioned off on July 19 and July 26, respectively.
On the other hand, P15-billion of combined 91-day, 182-day and 364-day T-bills will be offered for each of the four Mondays of the month.
In recent auctions, investors have been asking for higher yields on the back of expectations that the Bangko Sentral ng Pilipinas and the US Federal Reserve would continue to wield monetary policy to tame inflation hobbling economic recovery.
Last Tuesday, the Treasury also failed to raise money in its last government securities auction under the Duterte administration as it was forced to reject all bids due to the “excessively” high rates demanded by investors.
No bids for the P35-billion offering of reissued 7-year T-Bonds were awarded by the auction committee as the security would have fetched an average rate of 6.947 percent, higher than the benchmark secondary market rates.
“Market excessively-priced risk premium in [the] offering just issued recently,” National Treasurer Rosalia V. De Leon said.
Had these were fully awarded, the debt paper would be higher by 32 basis points than the Bloomberg Valuation Service (BVAL) Reference Rates for the tenor at 6.627 percent and up by 31.1 basis points than the BVAL rate for the security itself at 6.636 percent.
The auction was oversubscribed as total bids reached P62.3 billion, exceeding the amount of offering.
For this year, the government is expected to borrow a total of P2.2 trillion, around 75 percent of which is expected to come from domestic sources.
The national government’s borrowing tack has pushed debt-to-GDP ratio to a 17-year-high at 63.5 percent. That is above the internationally recommended 60-percent threshold by multilateral lenders for emerging markets like the Philippines. The ratio of debt to gross domestic product (GDP) is also the highest since the 65.7 percent recorded in 2005 under the administration of then-President Gloria M. Arroyo.
Image credits: Walter Eric Sy | Dreamstime.com