Pardo, however, said that, unlike the ERAP bonds, the new bond offering will not be used to finance government’s agricultural projects, but would likely be used for lending to the housing and construction sector.
"The government will pump-prime the economy next year through the housing and construction sector which has a multiplier effect on other industries like cement, steel and wood," Pardo said.
Government’s decision to pump-prime the economy is based on expectations that the economy will grow by two percent next year.
Even with the planned pump-priming next year, government is still targeting a budget deficit level of P85 billion.
Some analysts have criticizing the government for continuing to argue for further pump- priming instead of concentrating on fiscal stability.
Bid applications for the P10-billion offering hit P6.356 billion, surprising the government of investors’ warm reception on the debt paper. Sources said the government had been expecting to get an initial P2 billion out of its authorized offering of P10 billion.
Out of the total bid applications, government awarded only P5.286 billion at an average yield of 17.977 percent.
Finance Undersecretary Joel Banares said the response to the maiden offering has encouraged the government to make another bond offering.
"There is a natural market for these government debt papers which are insurance companies and mutual funds," Banares said.
National Treasurer Leonor Briones said there is a bias for locally issued debt papers because such instruments are free from the risk of foreign exchange fluctuations.
She said the 25-year T-bonds are the longest maturity available and will now set a new benchmark for corporate borrowings.
Banares said the market’s warm reception to the 25-year T-bonds "means that investors have taken a very positive view on interest rates and the Philippine economy in general."
Banares noted that the 25-year T-bonds are the longest term in Asia except for Japan which has a 30-year bond.