Gov't may borrow less from domestic market in Q4

MANILA, Philippines - The government may borrow less from the domestic market in the fourth quarter of the year compared to the P108 billion that it programmed to borrow in the third quarter of the year, a ranking official said yesterday.

“It will likely be lower than the third quarter borrowing program,” Deputy Treasurer Eduardo Mendiola said.

He said the fourth quarter domestic borrowing plan may be lower because it takes into account proceeds from the planned retail treasury bond (RTB) sale in October of at least P60 billion.

Mendiola said despite the possible reduction in next quarter’s borrowing plan, the Treasury is likely to keep the volume of Treasury bonds and bills at P9 billion and P7.5 billion, respectively, per auction.

“We need to continue keeping the supply of T-bills in the market,” he said.

The government borrows from the local debt market through the issuance of Treasury bills and bonds.

This developed as Mendiola said the government is now firming up the details of the planned 25-year RTB sale.

He said the Treasury is hoping to sell at least P60 billion worth or RTBs but expects to sell more because of robust demand.

The government has already tapped the Land Bank of the Philippines and the Development Bank of the Philippines as lead arrangers. The two government financial institutions are expected to form a consortium of other banks to help them handle the sale.

The indicative auction date is Oct. 24 after an offer period of Oct. 9 to 22.

RTBs are debt papers issued by the government for as low as P5,000. These instruments are ideal options for retail investors who want to park their funds in government debt papers.

The government is hoping to exceed the P179.9-billion RTB sale in February.

It relies on local and foreign borrowing to fund its budget deficit, which is expected to hit roughly P279 billion this year or 2.6 percent of gross domestic product (GDP). Last year, the budget gap hit P197.8 billion, lower than the original program of P300 billion set for 2011.