By Aaron Michael C. Sy again Beatriz Marie D. Cruz, Journalists
The PHILIPPINES is looking to borrow P310 billion in the domestic market in the fourth quarter, the Bureau of the Treasury (BTr) said on Thursday, amid expectations of further rate cuts that could lower yields.
The scheduled auctions put the government in its best position to borrow money for the year, State Treasurer Sharon P. Almanza said in a Viber message.
This year’s borrowing program is set at P2.57 trillion – P1.92 trillion from domestic sources and P646.08 billion from overseas, according to Treasury data.
Interest rate cuts by the US Federal Reserve and the Philippine central bank may lower yields during the auction in the last quarter, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
He added that less borrowing is due to more holidays at this time. “Even National Government borrowing needs are easing in the fourth quarter, with smaller maturities of government securities during the month and quarter shortened by holidays, although there may be some window-dressing activities towards the end of the financial year.”
The Treasury office will try to collect R220 billion in Treasury bills (T-bills) and P90 billion in Treasury bonds (T-bonds), it said in a notice posted on its website. In the third quarter, BTr raised P672.5 billion, higher than the P630-billion plan.
In October alone, the government plans to borrow P145 billion — P100 billion in T-bills and P45 T-bonds.
The government will hold five auctions of T-bills next month and will try to raise P6.5 billion through the use of 91-day and 182-day tenants in each auction. It will also provide P7 billion in T-Bill for 364 days every week. Next month’s auctions will be held on September 30, October 7, 14, 21 and 28.
Meanwhile, BTr will try to raise P45 billion in T-bonds in three auctions of P15 billion each in October – with five-year bonds in Oct. 1, a seven-year loan on Oct. 15 and 10 year paper on Oct. 29.
In November, the government will seek to raise P90 billion in the domestic market – P60 billion in T-bills and P30 billion in T-bonds.
The Ministry of Finance will ofP6.5 billion worth of 91- and 182-day T-Bills and P7 billion of 364-day bills at auction on November 4, 11 and 13.
For long-term debt, the government will issue P15 billion each in 20-year T-bonds on Nov. 12 and a five-year note on Nov. 26.
In December, the Department of Finance plans to raise P75 billion in the domestic market – P60 billion through T-bills and P15 billion through T-bonds.
BTr has four T-bill auctions scheduled for December. It will sell P5 billion each in 91-, 182- and 364-day T-bills at each auction on Nov. December 10.
Treasury Secretary Ralph G. Recto, a member of the central bank’s Monetary Board, said they couldfford to cut interest rates further and match the size of the Fed’s rate cut, Reuters reported.
“The Fed reduced by 50 basis points (bps). I think we can also do part of the percentage,” said Mr. Recto a told a news conference this week.
The Fed began cutting rates on September 18, with a more than half-point reduction, likely to be followed by 25-bp cuts in November and December, according to Reuters.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. earlier he said there is room for a single interest rate cut this year. The next BSP meeting is on Oct. 17.
It goes in a littlefThe bank allowed the central bank to cut its key rate by 25 bps to 6.25% in August, fThe first rate cut is from November 2020, before central banks including the Fed.
In the short term, a lower fourth-quarter borrowing schedule could push yields lower unless the government issues unscheduled borrowing such as retail Treasury bonds, the trader said in a text message.
Ms. Almanza said BTr had yet to decide whether to issue Treasury bonds this year.
“So far, our auctions have been successful, and we’ve grown a lot at home, so it will depend on thatfiit,” he said in mixed English and Filipino on September 17. “It’s not really necessary fI’m sick of this year’s planned loan… So, to better manage the expenses and debt of serunfortunately, we don’t have to borrow everything.”
The government last issued Treasury bonds in February, when it raised a record P584.86 billion with a coupon rate of 6.25%.
The trader also noted that the fourth quarter’s borrowing schedule is roughly in line with planned maturities during the quarter.
The government borrows locally and external sources to help finance its budget deficit, which reached P1.48 trillion or 5.6% of economic output this year.
SCHOOL OF GOING TO GDP
Meanwhile, the Philippines’ domestic debt to gross domestic product (GDP) ratio fell to 12.1% in the second quarter from 13.2% last year, indicating “stable” debt management, the Institute of International Finance (IIF) said.
This was below the 47% average in emerging markets in Asia and the global average of 60.9%, the report said.
For non-financial corporations, the debt-to-GDP ratio in the three months ended June further declined to 26.8% from 28.7% last year. Philippine government debt fell slightly to 56.8% of GDP from 56.9%.
Debt in the Philippines fthe financial sector also declined to 7.6% of GDP from 8.8% a year ago, IIFC said.
The agency’s Global Debt Monitor looks at debt across all sectors in mature and emerging markets.
Richard Francis, executive director of Fitch Ratings and co-head for the Americas, said the Philippines’ stable credit outlook continues to be supported by growth.
“There are some challenges there, but I think the other important thing is that the growth is supported by the average of the Philippines,” he told a news conference on Wednesday night.
In June, Fitch Ratings affirmed the Philippines’ investment grade at “BBB” and maintained its outlook at “stable”. A rating of “BBB” means that the economy can pay its debt.
Economic growth in the Philippines reached 6% in the first quarter, falling short of the government’s target of 6-7%.
Christian Kopf, head of Fixed Income and Currencies at Union Investment Group, said that the Philippines can control its debt if there are low borrowing costs.
“The Philippines is a country that is doing a very good job in its investor relations programs… and I think it is playing a very low-interest loan game. costs,” he said at the forum.
Leonardo A. Lanzona, an economics professor at Ateneo de Manila University, said debt still accounts for a large part of the country’s economic output.
“Although the government’s debt-to-GDP ratio may have decreased slightly, it remains the dominant factor in the system, with debt over 50% of GDP,” he said in a Facebook Messenger chat.
“Emerging economies are expected to have lower debt-to-GDP ratios because they generally have less borrowing capacity and must avoid excessive debt to maintain investor confidence,” he added.
Treasury data showed that the Philippines’ debt-to-GDP ratio will rise to 60.6% by the end of 2024. It is expected to decrease to 60.4% in 2025, 60.2% in 2026, 58.4% in 2027 and 56.3% in 2028.
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