Government to borrow P200 billion from local debt market

MANILA, Philippines — The government will borrow P200 billion from the domestic debt market next month as interest rates continue to drop for both short and long-term securities.

In a memorandum to all government securities eligible dealers released yesterday, the Bureau of the Treasury said it would auction off P15 billion each in T-bills for the three Mondays of February. The other one is set on Jan. 30.

The short-dated T-bills will be offered at P5 billion each with benchmark tenors of 91, 182 and 364 days. Total T-bills to be offered will be P60 billion.

For the long-term debt securities, the Treasury plans to raise P35 billion each in T-bonds for three Tuesdays of February and one on Jan. 31, for a total of P140 billion.

The T-bonds on offer will have maturities of 13, five, three and 10 years, respectively.

The February borrowing program is just the same as the P200 billion opening salvo for 2023.

However, the January program was upsized to P212.4 billion as the Treasury decided to award more following lower interest rates demanded by investors.

This month, the Treasury raised P58.4 billion in T-bills and awarded an upsized P154 billion in T-bonds.

Interest rates are seen treading lower this 2023 as inflation locally and globally are also easing.

Last year, inflation settled at 5.8 percent, but is expected to cool down in the months ahead. The Cabinet-level Development Budget Coordination Committee said inflation would moderate to 2.5 to 4.5 percent in 2023 as global oil prices start to stabilize.

During yesterday’s last auction for January, the Treasury fully awarded P35 billion for the reissued 10-year T-bonds on offer with a remaining life of nine years and seven months.

The 10-year T-bonds fetched an average rate of 5.913 percent, dropping by 23.1 basis points from the 6.144 percent BVAL Reference Rate, which is the standard for securities.

Rates went from a low of 5.749 percent and a high of just 5.99 percent. The average rate was also significantly lower than the 6.75 percent coupon rate when the T-bonds were first issued in September last year.

At that time, the Treasury also raised P35 billion but rates were higher at 6.703 percent.

Demand for the securities attracted P93.696 billion, oversubscribing the auction by 2.68 times.

Bids slightly went down by six percent from the P99.311 billion during the original issue date. It also slipped 30 percent week-on-week.

The latest offering has a maturity date of Sept.15, 2032.